International Market, Entry Plan, and Strategy for Luscombe Drinks Company

Introduction

Luscombe drinks is a private limited company that makes organic soft drinks, juices, and mixers. The drinks are handcrafted in a firm in Devon in small batches. They are usually made from the finest raw organic and wild ingredients and spring water from Dartmoor. It started trading on 30^th November 1987, with its headquarters in Devon, United Kingdom. It is an active company with 29 active current directors. It supplies its products to more than 12 countries and produces more than 9.5 million bottles annually. It occupies more than 1% of the market share in the United Kingdom (Ferrell et al.,2021).

The company has a competitive advantage in that it can provide an exciting and flavourful range of premium organic soft drinks. By so, it can provide something for almost every occasion and taste. Because the company uses the finest organic ingredients, it has been able to continually produce beautifully crafted drinks making them more attractive to prospective customers. This has made the company beat the competition in the industry, making it enjoy the benefits that come along with competitive advantages, such as a positive business image that lures the customers to buy and consume its products. This later translates into higher profits to be realized in the course of doing business. The company products are currently available in 19 countries. The exports have in the last nine months reported very high increase levels. It is currently proving to be one of the best drinks companies globally (Prahalad and Doz,2017, pp, 249-257).

The focus product for developing a market plan and strategy is produced by the company known as passionate ginger beer. It is one drink that combines the spice of ginger with the sweetness of passion fruit. Customers prefer this drink as it is a remedy against nausea and morning sickness. This drink is also preferred as it enhances digestion and helps the food move smoothly in the stomach. These qualities make it important for the product to be exported to as many countries as possible so the consumers can enjoy the health benefits that it comes along with.

International Country Selection

Luscombe drinks Passionate ginger beer has potential export markets in South Africa, Canada, Britain, and Ireland. These countries have proven to have many potential consumers of this product because of its health benefits (Peng,2021). The product is in high demand, which will allow these countries to grow as they trade in the product. South Africa has proven to be the best export market, depending on the market selection matrix in the appendix. This is because the country provides high market potential meaning it is easy to win many customers (McKeever,2018). It also has ease of entry as the country does not have many competitors in that product. The distance from the United Kingdom, where the Luscombe company is located, is far from south Africa, making it easy for them to sell the product as the challenges they face in producing such a product may not be known in the new potential market. The macro risks involving political actions are favourable to venture into the South African market as there are low instances of political instability, making it easy for a business to thrive in such a country.

Environmental Analysis

A business environment is the variables or forces that could affect its operations. This is an analysis usually carried out strategically to identify the internal and external factors that could, in the future, affect a company’s success (Wensveen,2018). The factors that affect businesses can either be internally or externally generated (Peng,2021).

Micro Environmental Analysis

This environmental analysis involves analyzing the internal variables and forces that directly affect the business’s operations. The management, therefore, needs to consider this, be aware of the existence of such variables and consider the possible ways of handling them to ensure the smooth continuity of business operations. The factors are in the control of the business, and therefore the management can put up measures to handle them effectively, so business operations are not affected negatively. They include:

• Market

The market for this product has increasingly grown over the years, with its most consumers being people of middle age (McKeever,2018). This is because they use the product to beat fatigue and nausea as they are involved in very active activities in their daily lives. It also prevents the symptoms of heart disease. This product is also a very strong anti-cancer agent. This makes it to be very attractive to the old aged citizens. The use of sensors that monitors the temperature of the mash in the process of brewing as well as the cleaning agents, therefore, enabling the regulation of the process. There is also usage of artificial intelligence which is used in predicting beer quality. This is through analysis of data which is usually collected at different stages during brewing on the carbon dioxide levels in real time (Kotabe & Helsen,2022). These technologies help ensure that companies operate more efficiently and effectively. The sales are expected to increase shortly as people become aware of and embrace this product. This is unlike the fact that people fail to take beer because of its alcoholic nature. The passionate ginger beer comes with more health benefits than harm. This indicates that businesses will enjoy the benefits of large-scale sales in the future and will therefore realize high returns on their investments.

• Customers

The middle-aged group prefers this product. This is because they use the product to pass the time and also because of its health benefits. It is moderately used by young and aged people. They consume this product mostly when they are away from workstations, evenings, weekends, and holidays. They tend to consume during such times to keep themselves busy, as most of the time, they do it as a group (Johnson,2020). The product is always available in shops and clubs. Most consumers will always prefer to buy it from the clubs as they have resting places. This will allow them to sit down and chat with their friends as they enjoy their drinks. Every category of consumers of this product has its reasons for consuming it. Young people will always consume the product to keep themselves busy compared to the old, who prefer consuming it because of its health benefits like preventing heart problems. The consumers in terms of gender tend to be more men than the rate at which women who consume the same product.

• Competitors

Luscombe drink’s invention in the south African market should face competition from existing companies. One supa ginja was founded in 2008.It has signed a deal with Shoprite to supply the whole world and manufacture a private–label ginger powder for the retail market. This company aims to increase the growth rate by 7.1% from 2022 to 2023. This is after the company persevered the covid 19 pressure, decimated many entrepreneurs and small businesses (Peng,2021). It was able to forge a supplier deal with ShopRite, and this made the company grow exponentially. The company also seeks expansion in countries such as Lesotho, Eswatini, Botswana, Namibia and Zambia. This will see it raising the sales revenue, and later, the net profit margins are set to rise.

Massive marketing is where the company banked its growth by using its profits during the lockdown occasioned by the covid 19 virus outbreak. This made many potential customers know about their product and win so many, giving them enough money for more expansion and growth of the company. Its ability to merge with Shoprite has also contributed to its massive growth as they were able to share costs and learn new and more innovative ways of doing business. This is because it is a well-known company that helps supa ginja get a national footprint. The fact that it is made traditionally also makes it more acceptable to the customers, as most will always prefer traditional products made using traditional ingredients (D’Cruz, 2018, pp,75-89).

It has had challenges in the transportation part of its products. This is because the company incurs very high transport costs as they supply their products to the reach of the final consumers. This translates to increased cost of sales, narrowing the gross profit margin despite the company having a large market base. It also has a challenge for cash-strapped consumers (McKeever,2018). This means that the consumers of the product usually have little income and, in some instances, no expected income, making them unable to consume the products. This will then translate into decreased sales and later to low profits making it unrealistic for the company to continue in operations. They also face a challenge as they are mostly financed by debt capital. This gives the company a burden of payments of interest charges on the debt. This translates to high costs of obtaining finance as they will be expected to pay back the interest plus the principal amount and any other penalty incurred in instances of default on the loan repayment.

The company may face some barriers as it attempts to enter the South African market (Johnson,2020). More technical know-how may be needed in the existing companies where one wants to invest. This means that the company will not be able to meet the standards that the customers expect from such a product they have previously been enjoying. Lack of available distribution channels may also hinder entering that market. This would mean that the products will take too long to sell, meaning that a lot of money will be held in the stores (Kotabe & Helsen,2022). Inadequate capital could also be another barrier to entry. This is because the company will be expected to invest heavily in terms of staff, equipment and such to produce a product that will be acceptable to a potential customer even though they have been having the same product in the market.

Macro Environmental Analysis

This is an analysis of the variables and forces outside the business that affects the business operations indirectly in one way or the other. They are found outside the business but need to be considered as they may affect the business operations at one point. Therefore, managers need to consider them, be aware of how they would affect the business operations and put measures to counter their effects where possible. These factors are usually beyond the control of the business. They include:

• Political environment

The political environment is a major determinant of business growth or failure. In cases where there is political instability, such as war, people will opt to close down their businesses and stay at home for their safety (Johanson & Vahlne,2017, pp. 145-154). This would mean that they will hold a lot of money in their stores which could have been sold to give them profits for growth and personal development. Change in government also affects businesses. The new government might develop new methods, laws and regulations for conducting business. This would mean the company may incur additional costs to adhere to the new government regulations.

• Economic environment

The different factors in an economy affect any business’s survival. Low economic growth would mean that people will need more money to cater for their expenses, meaning that they might not even be able to purchase certain products. The level of unemployment is always a major concern for any business. When people are unemployed, they will have less money to spend. They shall then engage in criminal activities, making it risky for a business to survive in a certain market (Johnson,2020). The level of inflation, meaning the general rise or fall in the prices of goods and services, is also a key to consider. The more the prices rise, the higher the costs of inputs to produce the final product and the lower the profit margins. When goods’ prices drastically fall, it means that the business can easily purchase the raw materials at a lower price and hence be able to make and realize high-profit margins. When the exchange rates and interest go high, the cost of obtaining debt will go high, making it impossible for many businesses to obtain additional funds through debt financing. Lastly, global economic trends affect business operations. An example of covid 19 virus outbreak led to many businesses closing down and bringing down the incomes of business persons globally (Peng,2021).In such an instance, all businesses are affected in the same manner, leading to the businesses’ inability to continue operations.

• Social-cultural environment

Most countries contain populations of the middle-aged group. This category of the population is always in high demand of many products and is active when working. Therefore, they can get a lot of money at their disposal, making it easy to help in business growth and sustainability. Different social groups have different values. Some believe that the consumption of a certain product is against social values, while others do not have such considerations. This means some businesses will do well in some areas and poorly in other parts. Other societies will have measures to prevent consumers from consuming a certain product. This could be by use of measures like an increase of taxes on such a product which will later translate into an increase in the product prices. This makes it challenging for prospective consumers to consume the products as they are charged high prices. They will end up consuming other recommended products or even not consuming some products at all.

Nevertheless, people’s lifestyles have currently changed. Most people consider consuming luxurious products making such a business in the beer industry thrive. His have changed over time, and people never consumed such products some years ago.

• Technological environment

Technology is the one that is driving the world of businesses today. Most of the tasks considered to be done by people have now been transferred to machines and new technologies that handle them(Ferrell et al.,2021). The methods of communication have changed from the traditional methods like messengers and blowing of a horn to pass a message. They have been overtaken by the time where nowadays there are more fastest. Better and more convenient methods of communication. This makes it easy for businesses to pass information to the intended parties by using emails and video conferencing for holding messages. This has improved business efficiency by a great level. The adoption of different machines that are the high end which helps carry out businesses faster and more efficiently has changed how businesses are being conducted compared to the early days.

• Legal environment

Countries have different legal systems that govern how businesses should be run. The European Union has set out rules allowing businesses to operate in any part of the world that they feel comfortable working from. This makes it easy for businesses to open branches in any part of the world and enjoy the benefits of economies of scale (D’Cruz, 2018, pp,75-89). Different governments have different rules and regulations which govern how businesses should be operated. Some are exploitative, making it difficult for small and medium enterprises to venture into such a market. They may have very high tax rates for different products, and it may be unfavourable for businesses unable to raise the same. This is because the regulatory authorities will always follow up on non-compliant businesses and take actions that may negatively impact their operations.

• Ecological/physical environment

The physical environment that surrounds a business also determines its survival in a certain market. The high levels of pollution could lead to people falling sick, meaning that there will be very high rates of absenteeism in the workplace, leading to low productivity. This means that the company may incur very high costs regarding health kity for their employees and other general welfare expenses (Wensveen,2018). Availability and scarcity of energy is also very crucial physical factor. When energy is scarce, the cost of getting it shoots up, which impacts the prices of goods and services as they will also go high to cover up for the increase in energy prices.

The existence of environmentally friendly ingredients always decreases the negative impact that could be impacted on the environment. They help do away with anything that could have resulted in such losses in the business due to ingredients that are not friendly to the environment that could have caused such pollution and impact negatively on people’s health. Companies should always consider using environmentally friendly ingredients even before they venture into their desired business. They should also consider using products and items that offer a recycling chance and packaging that can be reused sometime in future to avoid wastage. They should also consider packing their products in such a manner that will ensure they are using the minimum material to package. This will reduce packaging costs which will translate to higher profits.

SWOT Analysis

This is one analysis which is important to any business as the feedback from the analysis is useful in evaluating the strategic position of a business. This is through identifying its strengths, weaknesses, opportunities and threats (Kotabe & Helsen,2022). The strengths and opportunities must be built on, whereas the weaknesses and threats must be avoided or controlled.

• Strengths

The company’s products are well and beautifully crafted, and they are very diverse, giving the customers a variety to choose from. They are also free from artificial additions, making them very attractive to many customers because they always prefer products made from traditional ingredients.

• Weaknesses

The company has yet to invest fully in research and development. This could be necessitated by the fact that they could need more financial resources. The costs of inventories to produce the final products are usually very high leading to low cashflows and hence low-profit margins.

• Opportunities

The company can take advantage of the technology and improve its business. The fact that it has very diversified products allows it to sell more as the customers have a variety to choose from (Johanson & Vahlne,2017, pp. 145-154). Carbon and energy reduction is also an opportunity for Luscombe drinks, where they can acquire them at a lower price.

• Threats

This company faces competition as many companies already offer the same products. The presence of few suppliers makes it challenging to supply the products to the closest reach of the final consumers. As the consumer’s tastes and preferences keep changing, it poses a challenge to this company as some of its products may need to be more marketable. The covid 19 outbreak is also a threat that affected every other business worldwide, making it difficult to enjoy high profits.

Target Market and Positioning

Target Market

The targeted market for this product is the middle-aged group of people. This is because they have a lot of income at their disposal and would consider consuming this product to pass the time and gain the health benefits that come with it altogether (D’Cruz, 2018, pp,75-89). We could also target the old, usually in unhealthy conditions to relieve their nausea and help them prevent heart problems. It could also be made available in rural areas to reach this group of customers.

Positioning

The product should be considered the best in the market, with relatively harmful effects compared to other alcoholic drinks. The products are to be made more available in liquor stores and entertainment joints as those are the areas where prospective customers are expected to be found. It should be well branded with the ingredients used in the production well stated to win the customer’s trust.

Position Statement

This product is of its kind as it contains passion and ginger. The health benefits associated with consuming the same are way more than the negative side of it. It is positioned to satisfy both the leisure needs of the consumer and health needs, including the prevention of heart diseases.

Entry Mode Strategy

• Agents

These people advertise a company’s product or service on social media pages, televisions or a company website (Prahalad and Doz,2017, pp, 249-257). These could be of great help when venturing into a new market as they always have enticing skills to win customers easily. Most of them will offer customers discounts, which increases sales and may later translate to higher revenues as once the customer consumes the product for the first time, they may become loyal customers.

• Distributors

These people will buy non-competing products or product lines and sell them directly to the customers. They link the producer and the downstream entity in the distribution channel. These could be of great help as they smoothly connect manufacturers and customers. They link communication from the producer to the customer and from the customer to the producer. They could also be resourceful as they also create value-added packages that complement the company’s product.

• Licensing

The company could obtain permission from the licenced person (Johanson & Vahlne,2017, pp. 145-154). This will allow them to sell their products within a defined market area. They will be charged some royalty fees paid to the original owner. By so doing, they will be able to enter that market without fear and sell their products to realize the expected profits. They will be protected against disruptions by local regulators who demand that every business be licenced before its operations start.

• Joint venture

A joint venture is another entry strategy that Luscombe drinks could use as it ventures into the South African market. This is an agreement between two or more parties to put together resources to expand each of the respective shares of the market and the sales volume (Wensveen,2018). This helps a business grow faster, improve productivity, and realize higher profits later. It will also create an opportunity for accessing new markets and networks to distribute its products.

• Franchising

This is usually a contractual relationship found between the licensor and the licensee. It allows the owner of the business to use the brand of the licensor and the methods they use in distributing their products to the customers (Johnson,2020). This leads to an increase in the awareness of the brand. This leads to more customers knowing and loving the brand making the business more profitable and successful in the industry in which it operates. This could be a very good entry strategy if utilized by Luscombe drinks as it ventures into an international market. It would easily help sell the brand and realize high profits soonest.

• Export merchant

This is the one who is concerned about exporting goods. This is after he has purchased them from the manufacturers. They do not manufacture but buy already manufactured products and sell them internationally. These people have a lot of knowledge concerning market exports and products (Prahalad and Doz,2017, pp, 249-257). They could therefore be of great help as they could give the best advice on when and how to export the products as they are always up to date about the current issues in the export industry. They could greatly help this company as it ventures into a new market.

• Direct sales

This is selling products directly to the consumers. The sales are made in open places and other places that do not include selling from a store. This method is ideal as it does away with intermediaries that are used to distribute the company products. It translates to better prices offered to customers as the intermediaries always attach a certain profit margin for them after the sales (Ferrell et al.,2021). This would mean that the products are going to sell at a much higher price as compared to when they could be sold directly to the customers by the manufacturers. It helps the business to grow efficiently and put up businesses that are flexible and which involve low cost. It also ensures direct contact with the customers, which helps approach each customer differently. This helps build up a long-lasting relationship with them. This enhances the customer retention rate, which later translates into higher profits.

References

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Johnson, G., Whittington, R., Regnér, P., Angwin, D. & Scholes, K. (2020). Exploring strategy. Pearson UK.

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