Oreo\'s Entry into China and india

Oreo's entry into China and India presented two different types of challenges to the successful American cookie company. Because these two cultures were different from the American culture that had made the cookie famous in the U.S. (and each different from one another), Oreo had to consider how best to approach these two markets in order to make its product a worldwide success. Both countries represented enormous market opportunities for the company -- and each posed their own unique obstacles. China, for instance, was not traditionally a cookie eating nation; India was the biggest cookie eating nation. The former demanded a longer term strategy than the latter simply because of the Chinese orientation to cookies in general (let alone to the Oreo brand itself). From a SWOT perspective, Oreo was in a position to build its brand in both markets if it adapted to the particular demands of each. This paper will discuss how one could determine which markets to target short versus long-term and how one could develop a strategy for a new product as well as measure its implementation in Capsim.

The lessons learned from Oreo's market penetration and eventual success in both China and India show that some situations require long-term planning while other situations can bring immediate gain through short-term planning. Context is everything in all cases, and the contextual setting of China's market revealed to Oreo early on that its approach was incorrect. It could not treat the Chinese culture as though it were the same as the American culture. Mattel would make that same mistake when opening its House of Barbie (Burkitt, 2013; Wang, 2012). The Chinese culture (like the India culture) was price-conscious -- far more than the American culture that Oreo was used to. Thus, the company's first mistake was adopting a short-term, short-sighted approach to the new market and pricing its products too high. The other mistake it made was thinking it could sell the same American cookie to the Chinese, who really were not oriented to eating cookies (unlike the Indians, who were). Oreo achieved minimal penetration as a result and Kraft was obliged to rethink the company's approach.

Thus, for a company like Oreo with a very American product, taking a short-term approach in a foreign market like China was the incorrect method. To establish itself there it had to target China long-term: identify the characteristics of the culture that made it unique, ascertain what it wanted in a cookie, develop the cookie according to Chinese tastes (flavor, look, texture), and market it (package and price) in a way that would appeal to the Chinese consumer. In effect, Oreo re-built its image and product from scratch -- it created a brand new cookie that the Chinese would like (one that looked nothing like the American Oreo) (Clements, Jain, Jose, Koellmann, 2013). This would enable the company to establish a footprint in the country -- a foundation upon which it could build its brand, which is exactly what happened. By taking the long-term approach and taking the time to learn the culture, it could ease its way into the country and into the consciousness and overtime implement its own American variation and method of eating (dunking the cookie in milk).

A SWOT analysis of the Oreo company entering China would reveal the following:

• Strength: Strong company, dominant in America.

• Weakness: Unappealing to Chinese consumer because expensive and the flavor was too bitter or too sweet; China was not traditionally a cookie-eating culture.

• Opportunity: Huge market potential in China; possibility of gradually introducing American concept of pairing Oreo's with milk after successfully launching a product that would appeal to the Chinese.

• Threat: Ignorance of the culture, refusal to find out what would appeal to the Chinese consumer.

Part of the strategic model that could be applied using Capsim for a long-term target would be to fund the initiative with long-term bonds. With today's low interest rates, this is a particularly appealing approach to acquiring the capital necessary for long-term investment (research and development, marketing, taste testing, consumer surveys -- all of this could be funded by corporate bond sales at low interest rates). The research and development could be slated for 1-2 years with a finished product developed and ready to be marketed in China thereafter. Brand development would follow and the Americanization of the product could be achieved once the culture had shown an interest in the "American" cookie and method of eating. A small R&D team is all that would be needed for this endeavor: a half dozen to a dozen individuals handling the various aspects of the cultural analysis (surveying, taste testing, etc.) while the product development crew could be the same size and be set in motion upon receiving the findings of the cultural assessment crew. Eventually, the brand would be able to build its way up to being a dominant player in the market by taking stock of its strengths (its dominance in America would make it simple to sell long-term bonds to investors), its weaknesses (ignorance of the Chinese culture, which would need to be addressed), opportunities (the enormous size of the market in China), and threats (refusal to adapt, which would have to be overcome).

In India similar challenges faced the company. The SWOT analysis for Oreo's entry into India would be as follows:

• Strength: Strong company, dominant in America

• Weakness: Too expensive for India economy, no awareness of product in India; not localized

• Opportunity: Opportunity for localization through acquisition of Cadbury which already a footprint in the country; India was also traditionally a strong biscuit (cookie) eating society ("the world's biggest market for biscuits" in fact "with a 22% market share") (Clements, Jain, Jose, Koellmann, 2013, p. 110).

• Threat: Competitor's low pricing and strong distribution (Parle G. is everywhere and affordably priced for the price-conscious Indian consumer)

India would clearly be a much different case from China: a short-term target could be used here -- mainly because India was already a cookie-eating culture. The main objective in this case was to make the product more appealing to Indians, which simply meant tweaking the taste (making the cookie sweeter) and altering the packaging. Then following the Indian marketing methods -- lots of promotional displays and competitive low pricing -- would help the company secure a strong foothold. Using the Cadbury brand name (brand recognition already achieved in India) the company could foster immediate rapport with Indian consumers. Using locally produced materials would be another plus as it would both help the Indian economy and allow the company to outsource labor at a cheaper rater.

The team would implement a strategic planning model for the sensors our company is developing in the Capsim simulation by following the same steps that Oreo took in both countries. The first step in China would be to analyze the culture and see how the sensors as produced in our way would be received. We would have to survey the consumer and identify changes to the product that would have to be made if any. The same would go for India. In countries where markets offer tremendous opportunity, a long-term target is appropriate, whereas in markets that already open to the product a short-term target would be appropriate. In the latter case, the team would approach the planning strategy by focusing on marketing and packaging -- displays and promotions that would drive sales early and quickly and help generate buzz for the product. In the former case, where a long-term approach is desired, the company would have to conduct research and development after studying the cultures and arriving at a solid idea of how the product should work, look, and be marketed.

Successful implementation of the strategic planning model would be measured in terms of consumer satisfaction (surveys) and sales targets being reached. Sales targets would need to be defined ahead of time based on pricing models constructed within the competitive range identified by the marketing team, including promotional sales so as to attract early and/or new buyers. Cost of producing would also need to be factored into this equation and the strategic model would follow the Oreo model of using local labor and sources, as localization creates a bond between the culture and the company and allows for costs in production to be reduced as well.

Another measure of successful implementation would be measured by growth and distribution. As the Oreo case study shows, distribution was a major factor in success for the company in India, as many markets are rural and require a strong distribution network to be reached. This in conjunction with smaller, more affordable product packaging would alter the way the product would be delivered to the consumer. Thus, it is important that our sensors be packaged and distributed in a similar method so as to facilitate growth and distribution. Measuring the success of the implementation of the model could include hitting target rural areas and sales numbers for these regions while acquiring distribution channels at low-cost rates. Managing good will among local producers, local distributors and local communities would be essential for managing the implementation of the strategic model over time as all of this contributes to brand awareness and the cultivation of brand loyalty.

Monitoring brand awareness and brand loyalty could be achieved through both assessment of sales and survey of consumers. These strategic measurement options would need to be included so as to best understand how well the company is performing in certain markets. Finding out what is motivating the consumer to spend on products similar to ours (competitors) would help in our own SWOT assessment.

In conclusion, as the Oreo case study shows, there are significant challenges to a company entering into a foreign market. It must make an assessment of the country's culture and see how their consumers would feel about the product being offered by the company. If changes in the product and its packaging and marketing are required, these changes must be made: the purpose of entering a new market is to provide those consumers with a product that they will want -- otherwise, there is no purpose attempting to foist something on them that they will have no interest in. The strategy in these cases is to know the consumer and plot the long-term/short-term targeting goals accordingly.

References

Burkitt, L. (2013). Mattel Gives Barbie a Makeover for China. The Wall Street Journal.

Retrieved from http://www.wsj.com/articles/SB10001424052702304672404579183324082672770

Clements, S., Jain, T., Jose, S., Koellmann, B. (2013). Smart cookie. Business Today:

108-112.

Wang, H. (2012). Why Barbie stumbled in China and how she could reinvent herself.

Forbes. Retrieved from http://www.forbes.com/sites/helenwang/2012/10/24/why-barbie-stumbled-in-china-and-how-she-could-re-invent-herself/