Recent orders
Global Recession
Global Recession
Student’s name
Name of Institution
Global recession
Global recession can be defined as a time when there is a slowing down of economic growth globally. According to the international monetary fund, a global economic growth that is below three percent is indicative of global recession. Based on this criterion, it is estimated that the world has gone through four periods of economic recession dating back to 1985. This recession is attributed to the general declines in the economic growth of individual countries. According to Shiskin, J (1974), country that has its gross domestic product declining for two consecutivequarters, is deemed to be undergoing a national recession. The main reason for the declines in the global growth has been mainly attributed to the fact that most developing countries have been recording increases in economic growth. On the other hand, the developed economies have been rerecording a decline in their GDP growth rates over a long period of time. A global recession is expected, under normal circumstances, to re-occur after a period of between eight and ten years. This article will discuss the 2007 global recession. Included in the discussion; are the effects of the recession, causes and how the countries have struggled to mitigate the effects of this period (Allen, 29th Jan 2009).
Causes
There have been several explanations that have been advanced to explain the real causes of the global recession that was witnessed in 2007. To understand this better; the focus was directed to public monetary policies, especially in the US, and the role of the financial institutions in the countries. The first thing that is believed to have caused the downward trend in economic growth especially in the US is the competition. The competition was witnessed between the money lenders as they tried to edge each other in terms of market share and revenue. The main reason advanced for this is the lack of regulation in the money lending business. For instance in the US, the decline was brought about by the collapse of the securities related to mortgages. This was due to the availability of a lot of cheap money that arose from the reduced interest rates on the loans by the federal banks. This led to a lot of money being in circulation. Although this money was available in large amounts, the boom could not be upheld for long (Allen, 29th Jan 2009).
Another reason advanced for the global recession during this period, is the state of debt of the economy of the US. It is believed that countries that have large debt have high possibilities of drowning in the recession. This is mainly through making of the recovery process to be weak. For instance, the US has been experiencing a high debt that has gone up to three hundred and fifty percent of the of the country’s GDP. This has greatly been attributed to the discrepancies that exist in the wages of the citizens. The US has an imbalanced wage structure. In this country, the middle class have their salaries constant, while most of the country’s wealth is held by the higher class who are few in number. This then means that most people will resort to credit in order to sustain their families and get good standards in life. Another factor that led to global recession was the inability of the central banks to regulate the activities of the private banks in the economies. In the US, this lack of control came after the passing of the National Bank Act in 1893 (Allen, 29th Jan 2009).
Effects
There were several effects that accompanied the global recession in 2007. First, there was a decline in the amount of trade and goods exchanged especially up to the later part of 2008. It is also believed that, during this period, the global gross domestic product went on a downward spiral with an annual decline that had never been experienced since the one experienced in 1950s(Read, 2009).
Another thing that suffered a blow was the capital investment with reports indicating that there was a steady decline in this sector. This decline could only be matched with that experienced after the war in 1957.For instance in 2009, the collapse in the property investment was so bad that it was collapsing at an unprecedented rate of twenty three percent per year. Another thing that suffered during the global recession was the decline in income among the people. As compared to 1968, when an average worker was earning 32,844 US dollars, the earnings declined to 32,137 in 2010. The employment also declined at a percentage of about six percent as compared to the situation during the Great Depression. This state of unemployment has led to an increase in the numbers of disillusioned job seekers. This consequently leads to the increase in the numbers of people registeredunder the federal system, to be supported by the government (Read, 2009).
Another notable area that has fallen prey of the global economic recession is the political stability of most countries. For instance, in the US, there are efforts by the country’s intelligence system to ensure that the international instability that comes with global recession does not affect the country’s security. According to the business week, the global recession has posed a lot of political instability that needs to be dealt with decisively. It was during the global recession period that a lot of uprisings were experienced throughout the world. For instance in Iceland, elections had to be organized two years earlier than the expected date to cushion against the rising demonstrations in the country (Ewing, March 10, 2009).
The demonstrations were called by the people in reaction to failure by the government to mitigate the economic crisis. Similarly, in Greece, the people were up in arms against the government’s failure to tame the recession. They did this by freezing operations learning facilities, airports and other essential services in the country. Other countries that have experienced uprisings due to global recession include Moscow, China, United States and Spain (Traynor, 31st Jan 2009).
From the discussions above, global recessionhas a variety of causes and effects on the economy and the people at large. For countries to deal with the devastating effects of global recession they must come up with sound policies. According to the IMF recommendations(September 2010), global recession can best be handled by reducing the number of unemployed people. This can be done through increasing the avenues of job creation like educating the unemployed to get gainful employment. Each government should make job creation a long term avenue of economic recovery (Read, 2009).
References
Allen, P(January 29th, 2009). Global Recession – Where Did All The Money Go?
The Guardian. London.
Ewing, J (March 10th, 2009). Economic Woes Raising Global Political Risk. Business
Weekly Article.
Read, C (2009). Global Financial Meltdown: How We Can Avoid the Next Economic
Crisis.MacMillan publishers. New York.
Traynor, I ( January 31, 2009). Governments across Europe Tremble as Effects of Global
Recession Prompt Angry People to Take tothe Streets.The Guardian. London.
Global Procurement
Global Procurement
Details: Discuss the similarities (if any) and differences (if any) between purchasing, procurement, sourcing and supply management. (90% of words) Provide suitable examples to support your answer. Please provide introduction (5% of words) and conclusion (5% of words)
Introduction
The broad nature of procurement as a subject matter in the operation of a business and the ever changing operating environment has affected many aspects that are associated with procurement that creates need for elucidating similarities and differences evident between and among various aspects associated with procurement. This paper achieves this by taking a stepwise inquiry into the similarities and differences between purchasing and procurement, sourcing and supply management and it achieves this by taking a side-by-side approach in the analysis of facts and relevant philosophical underpinnings.
Purchasing and Procurement
It is not uncommon to find various organizations either using procurement and purchasing interchangeably or using one to imply the other. However this interchangeableness is in many ways a misnomer since the two functions are totally different even though they might share various similarities in execution of their objectives and functions. To better understand the relationship that subsists between purchasing and procurement, it is essential to put each of the two functions in its own context by way of definition, then look at similarities and close the section with differences.
From the perspective of definition, purchasing can be described as the subset of supply chain management and materials management that is concerned with the acquisition of goods and services to fulfill the goals set by the organization. This definition clearly shows that purchasing is part of the organization’s specific objectives and a way to achieve its goals related to logistics, or supply chain management in a specific sense. Therefore the functions of purchasing start at the purchasing department and are exclusively operational activities that begin with identification of need and conclude with tracking of purchasing activities. Procurement on the other hand entails a broader scope of activities that include strategic considerations as well as tactical considerations. The broader nature of procurement includes purchasing as a part of the functions of procurement. Nevertheless, there have been differing takes on the nature of differences or similarities evident between procurement and purchasing with some authors arguing that the two are interchangeable and that they denote functional activities that most frequently concern flow of materials and information. This notion was extensively supported by Monczka, Trent and Hadfield (Kaufmann (2002, pp. 3–33) who viewed purchasing and procurement as the same thing. Kaufmann (2002, pp. 3–33) also gives support to that notion of interchangeableness of purchasing and procurement.
Despite the differing ideologies about procurement and purchasing, there are several similarities and differences that can be drawn out based on the functions each of them plays. While purchasing activities are concerned with identification of purchasing needs procurement delves in material specifications, material studies and value analysis. In addition, purchasing involves extensive discussion with sales people and identifying suppliers while procurement focuses on market research and the entirety of purchasing activities.
With specific attention to suppliers, purchasing is responsible for selection of suppliers while procurement ensures management of supplier quality and administration of investment recovery. While procurement ensures management of investment recovery purchasing activities include management of purchasing records (Frazelle, 2002). From these assessments, it is noticeably evident that procurement and purchasing are related but are not the same and it would be a misnomer to use them interchangeably. Procurement includes other functions that are not present among the functions of purchasing and these include expediting, traffic and logistics, supplier quality control and also involve all the purchasing activities.
Purchasing and Sourcing
Having highlighted the definition of purchasing and its functions, it would be in order to directly look at sourcing; compare and contrast it with purchasing. Sourcing refers to part of procurement that specifically aims at getting, evaluating and engaging suppliers of goods and services (Trent and Monczka, 2003, pp. 26–36).
Purchasing and Supply Management
Supply management is a function of the supply chain management that entails organizing purchasing activities as well as procurement activities. Supply management also encompasses supplier qualification and selection teams, collaborating and strategic alliances that are aimed at improving the value of the supply chain and entire logistics functions (Bowersox and Closs et al., 2002). In addition, supply management activities also involve monitoring of supply environment to ensure that the organization and especially the supply chain management network is kept abreast with all the relevant information that relate to the smooth operation of supply chain activities and successful interaction between the organization’s supply chain component and other stakeholders or parties in the entire network.
Drawing of strategic materials acquisition plans also lies squarely in the docket of supply management activities. The activities performed by the two functions can be seen to have a point of intersection hence having a strong relationship. For instance, when the supply management department is tasked with supplier qualification and selection teams, it is upon the duty of the purchasing department to identify the suppliers that should form possible candidates for qualification (Kaufmann, 2002, pp. 3–33).
Moreover, as the purchasing department takes care of keeping the purchasing records and contrast administration, the supply management department ensures corporate planning activities are achieved and that monitoring is continuously carried out for improvement. The differences between supply management and purchasing are inclined toward the way their activities or functions are carried out. Supply management takes care of planning and control of activities that purchasing does (Christopher, 2011). In addition, the activities of supply management are more strategic as opposed to purchasing activities, which are more tactical than strategic.
Therefore the difference between purchasing and supply management is that purchasing takes a tactical focus as supply management leans on strategic focus. The similarity lies in the fact that the two departments deal with the almost same of related functions but only at different levels (Cooper and Lambert et al., 1997, pp. 1–14). For instance purchasing deals with suppliers just as supply management also deals with them but the differentiating factor is that purchasing selects the suppliers while supply management qualifies them and pursues quality monitoring and control. The overriding difference between the two functions is that purchasing can be viewed as and linked to order management hence more of an administrative function (Murray, 2009, pp. 198–202). On the contrast, procurement steps out of the administrative restrictions by moving away from the transactional aspect to the strategic side where it responsible for general gathering of resources.
Procurement and Sourcing
By now, it is evident that sourcing and procurement share a common orientation in that they both deal with strategic side as opposed to transactional aspect (Tan, 2001, pp. 39–48). However, the difference between the two as has already been demonstrated in discussion in other sections above, sourcing is a function within procurement and therefore procurement is still broader than sourcing.
Similarly, procurement and supply management share the strategic approach in the logistics and supply chain management arena. They are both detached from the administrative functions performed by purchasing. Sourcing and supply management also have these similarities in that the activities they engage in are more of strategic in nature than administrative functions (Murray, 2009, pp. 198–202).
Conclusion
The difficulty in deciding whether procurement and purchasing are usable interchangeably is not new and has created a genuinely heated debate yet it is evident that the terms are different in several ways. Procurement is broader than purchasing and encompasses purchasing functions within it while at the same time stamps its strategic approach by focusing on the strategic side of logistics. For similarities, procurement and purchasing deal with suppliers at least in one way or another, bringing their functions at an intersection and interdependence.
Reference List:
Bowersox, D., Closs, D. and Cooper, M. 2002. Supply chain logistics management. Boston, Mass.: McGraw-Hill.
Christopher, M. 2011. Logistics & supply chain management. Harlow, England: Financial Times Prentice Hall.
Cooper, M., Lambert, D. and Pagh, J. 1997. Supply chain management: more than a new name for logistics. International Journal of Logistics Management, The, 8 (1), pp. 1–14.
Frazelle, E. 2002. Supply chain strategy. New York: McGraw-Hill.
Kaufmann, L. 2002. Purchasing and supply management-a conceptual framework. Handbuch industrielles beschaffungsmanagement, 2 pp. 3–33.
Monczka, R. M., Trent, R. J., AND Handfield R. B. 1998. Purchasing and Supply Chain Management: Cincinnati
Murray, J. 2009. Towards a common understanding of the differences between purchasing, procurement and commissioning in the UK public sector. Journal of Purchasing and Supply Management, 15 (3), pp. 198–202.
Tan, K. 2001. A framework of supply chain management literature. European Journal of Purchasing & Supply Management, 7 (1), pp. 39–48.
Trent, R. and Monczka, R. 2003. International Purchasing and Global Sourcing-What are the Differences?. Journal of Supply Chain Management, 39 (4), pp. 26–36.
Global Market Opportunity In The Olive Oil Industry The Case Of Baser Food
Global Market Opportunity In The Olive Oil Industry: The Case Of Baser Food
Table of Contents
TOC o “1-3” h z u HYPERLINK l “_Toc289610282” GLOBAL MARKET OPPORTUNITY IN THE OLIVE OIL INDUSTRY: THE CASE OF BASER FOOD PAGEREF _Toc289610282 h 1
HYPERLINK l “_Toc289610283” Section I: The Growth, Development and Structure of the Global Olive Oil Market and Baser’s SWOT Analysis. PAGEREF _Toc289610283 h 3
HYPERLINK l “_Toc289610284” 1.0 Executive Summary PAGEREF _Toc289610284 h 3
HYPERLINK l “_Toc289610285” 2.0 The growth, development and structure of the global olive oil market PAGEREF _Toc289610285 h 4
HYPERLINK l “_Toc289610286” 2.1 An Overview of the selected Uppsala Internationalization market PAGEREF _Toc289610286 h 4
HYPERLINK l “_Toc289610287” Based on the above theoretical and operational levels, the olive oil market can be analyzed as follows: 2.2 At the theoretical level PAGEREF _Toc289610287 h 5
HYPERLINK l “_Toc289610289” 2.3 At the operational level PAGEREF _Toc289610289 h 5
HYPERLINK l “_Toc289610290” 3.0 Baser SWOT Analysis PAGEREF _Toc289610290 h 7
HYPERLINK l “_Toc289610291” 3.1 Strengths PAGEREF _Toc289610291 h 7
HYPERLINK l “_Toc289610292” 3.1.1 The Existence of Its Key Brand(S) PAGEREF _Toc289610292 h 7
HYPERLINK l “_Toc289610293” 3.1.2 Presence of International Olive Oil Organizations PAGEREF _Toc289610293 h 7
HYPERLINK l “_Toc289610294” 3.1.3 Existence of a Wide Market PAGEREF _Toc289610294 h 7
HYPERLINK l “_Toc289610295” 3.1.4 Efficient distribution network PAGEREF _Toc289610295 h 8
HYPERLINK l “_Toc289610296” 3.1.5 An Efficient Hardworking Staff PAGEREF _Toc289610296 h 8
HYPERLINK l “_Toc289610297” 3.1.6 Readily Available Raw Materials PAGEREF _Toc289610297 h 8
HYPERLINK l “_Toc289610298” 3.2 Weaknesses PAGEREF _Toc289610298 h 8
HYPERLINK l “_Toc289610299” 3.2.1 Weak Home Economy PAGEREF _Toc289610299 h 8
HYPERLINK l “_Toc289610300” 3.2.2 Little Financial Capability PAGEREF _Toc289610300 h 9
HYPERLINK l “_Toc289610301” 3.2.3 Inability to “Mass Produce” PAGEREF _Toc289610301 h 9
HYPERLINK l “_Toc289610302” 3.3 Opportunities PAGEREF _Toc289610302 h 9
HYPERLINK l “_Toc289610303” 3.3.1 An Increasing Olive Oil Market PAGEREF _Toc289610303 h 9
HYPERLINK l “_Toc289610304” 3.3.2 Continued Expansion PAGEREF _Toc289610304 h 9
HYPERLINK l “_Toc289610305” 3.3.3 Favorable Environmental and Climatic Conditions PAGEREF _Toc289610305 h 10
HYPERLINK l “_Toc289610306” 3.3.4 Increasing Health Conscious Societies PAGEREF _Toc289610306 h 10
HYPERLINK l “_Toc289610307” 3.3.5 The Variety of Benefits Associated With Olive Oils PAGEREF _Toc289610307 h 10
HYPERLINK l “_Toc289610308” 3.4 Threats PAGEREF _Toc289610308 h 10
HYPERLINK l “_Toc289610309” 3.4.1 Stiff Competition From Rivals PAGEREF _Toc289610309 h 10
HYPERLINK l “_Toc289610310” 3.4.2 Rising Inflation Levels PAGEREF _Toc289610310 h 10
HYPERLINK l “_Toc289610311” 3.4.5 The “Expensive” Name Tag Associated With Olive Oil Products PAGEREF _Toc289610311 h 11
HYPERLINK l “_Toc289610312” 3.4.6 Existence of Relatively Cheap Edible Oils PAGEREF _Toc289610312 h 11
HYPERLINK l “_Toc289610313” 3.4.7 Olive Flies PAGEREF _Toc289610313 h 11
HYPERLINK l “_Toc289610314” 3.4.8 Poor Harvesting Ppractices PAGEREF _Toc289610314 h 11
HYPERLINK l “_Toc289610315” 3.4.9 Inadequate Government Support PAGEREF _Toc289610315 h 11
HYPERLINK l “_Toc289610316” 1.0 Introduction PAGEREF _Toc289610316 h 11
HYPERLINK l “_Toc289610317” 2.0 The Adoption of Exporting Model PAGEREF _Toc289610317 h 12
HYPERLINK l “_Toc289610318” 4.0 Conclusion PAGEREF _Toc289610318 h 16
HYPERLINK l “_Toc289610319” 5.0 References PAGEREF _Toc289610319 h 17
Section I: The Growth, Development and Structure of the Global Olive Oil Market and Baser’s SWOT Analysis.1.0 Executive SummaryThe olive oil industry has experienced increased production levels across the globe in recent times. The producers of olive oil have expanded from large manufacturers to incorporate some large supermarket chains hence increasing the already existing stiff competition in the industry. This has called for the need for organized marketing in the industry since as The Olive Oil Source (2011) puts it, “the best oil is useless if you don’t have buyers for it.” In order to address the existing stiff competition, many marketing strategies have been adopted by both the manufacturers and their member associations.
This study therefore aims to analyze the growth, development and structure of the global oil market using chosen marketing theories. The study will proceed to perform a SWOT analysis for Baser Food Company.
2.0 The growth, development and structure of the global olive oil market2.1 An Overview of the selected Uppsala Internationalization marketThe global olive oil market can be based analyzed using the Uppsala Internationalization Market which, according to Buckley and Ghauri (1999), seeks to explain and predict two aspects involved in the internalization of a firm: i) the step by step pattern of institutional development within individual national markets; and ii) the expansion of firms across national markets as they move from nations which are proximal to those which are increasingly psychically distant (p.166).
The theoretical and operational levels of this model can be as summarized in the below diagram
38195251430020Psychic distance:
Firms choose new markets; markets characterized with increasing psychic distances
Psychic distance:
Firms choose new markets; markets characterized with increasing psychic distances
2266950439420THEORETICAL LEVEL
THEORETICAL LEVEL
22669502153920OPERATIONAL LEVEL
OPERATIONAL LEVEL
-190501353820Establishment chain:
Firms do not engage themselves in regular export activities
They service markets via selected agents
Performs sales subsidiary
Perform production subsidiary
Establishment chain:
Firms do not engage themselves in regular export activities
They service markets via selected agents
Performs sales subsidiary
Perform production subsidiary
4057650715645Firms study current activities
Firms study current activities
4000500182245Managements make commitment decisions
Managements make commitment decisions
266700715645Managements commit themselves to the markets
Managements commit themselves to the markets
266700106045Olive oil firms seek/gather market knowledge
Olive oil firms seek/gather market knowledge
Based on the above theoretical and operational levels, the olive oil market can be analyzed as follows: 2.2 at the theoretical levelThe Uppsala model emphasizes that the expansion process initiates with firms seeking knowledge on the existing potential markets. In the same way, olive oil firms expand by managements doing visibility studies in potential markets for expansion. This is shown when Mr. Ahyan, the sales director at Baser food company is allocated the task of comparing and analyzing the existing potential markets of Australia and USA. To make sure that a right expansion market is selected, Mr. Ahyan incorporates the assistance of his juniors and boss, Mr. Mehmet Baser (Sriram & Bilgin 2003, p.14). The market is also characterized by firms making intensive study activities for instance; Baser Food Company’s CEO mr. Mehmet makes intensive studies on the available ways for Turkish olive firms to approach into new markets. He studies the option of major Turkish producers creating a joint fund with their government to accelerate demands. He rules out this option on the fact that this would take long to be effected by the concerned stakeholders (Sriram & Bilgin 2003, p.14).2.3 at the operational levelAt this level, the Uppsala model emphasizes that firms do not engage in direct export activities, service markets via selected agents, perform sales and production subsidiaries and choose markets based on psychic distances. In the same way, the olive oil market is dominated by firms selling their products to foreign countries through use of agents. For instance, Baser Foods had employed the use of two agents to market and sell its products in the USA. In addition, Majority of olive oil firms across the world employed the use of exclusive distributors in their foreign supply chains. This meant that rival olive oil producing countries could not share the services of similar distributors.
The global olive oil market is characterized by olive oil firms concentrating themselves in traditional olive growing areas of the Mediterranean. Countries that were the largest growers for instance, Algeria and Brazil, also topped up as the largest producers of the olive oil (Sriram & Bilgin 2003, p.5-6). According to the Uppsala model, most business firms concentrate themselves in their traditional backyards to avoid the uncertainties considerably associated with entering into foreign markets (Buckley & Ghauri 1999, p.166). In the case of olive oil market, these uncertainties may include amongst others shifting consumer demands to other edible oils for instance, the sunflower oil, stringent regulations in some countries for instance, USA and preferential treatments offered to produces from specific regions for instance, olive oil from Italy. The global olive oil market has been characterized by many customers developing strong preferences to quality, taste and color. Sriram and Bilgin (2003) stated that the varying climatic conditions across the world led to olive oil customers developing strong preferences to olives from certain places of the world (p.2).
Olive oil market is also characterized by firms first expanding to markets that are geographically and culturally proximate to their home markets before expanding their operations to markets characterized with successively geographical and cultural distances. This concept in the Uppsala model is commonly referred to as the ‘psychic distance’. This concept is demonstrated in the Baser case study when the company establishes a strong presence in its traditional Turkey homeland before gradually expanding into Far East and the Pacific Rim, including Japan, Australia, Taiwan, and Malaysia (Sriram & Bilgin 2003, p.14).
3.0 Baser SWOT Analysis3.1 Strengths3.1.1 The Existence of Its Key Brand(S)Baser established the Cavallo D’Oro brand which continues to be highly attractive to many customers across global markets where it has been introduced. Sriram and Bilgin (2003) had noted that the brand had gained strong recognition due to its attractive packaging and its strong image (p.9). The two scholars also go ahead to postulate that Bayer had gone ahead to establish MedOlive brand at the insistence of one of its multiple distributors in Hungary and Israel who objected to sharing the Cavallo d’Oro brand name. The Cavallo d’ Oro brand name was chosen specifically to win on the strong preferences many oilive oil consumers gave to the Italian-sounding olive oils (Sriram & Bilgin, 2003, p.9).
3.1.2 Presence of International Olive Oil OrganizationsBaser had joined international olive oil organizations for example The North American Olive Oil Association which provided it with promotional support. Moreover, the existence of International Olive Oil Council (IOOC) and the California Olive Oil Council (COOC) has created awareness among consumers on the use of olive oil in the USA and the neighboring states. These organizations have initiated campaigns that create awareness on the use olive oil across the world hence increasing the consumer market for the product.
3.1.3 Existence of a Wide MarketThe variety of benefits associated with olive oil have availed an expansive market network for Baser to operate in. Baser’s expansive market incorporates United States, Italy, Spain, Venezuela, Russia, Poland, Georgia, South Korea, Canada, Saudi Arabia, Malaysia and Ukraine (Sriram & Bilgin, 2003, p.10). In addition to the above, the company’s sales and marketing director, Mr. Ahyan, is also considering establishing an active distribution network in the Far East, Japan and Taiwan (Sriram & Bilgin, 2003, p.11).
3.1.4 Efficient distribution networkSriram and Bilgin (2003) concurred that Baser had employed exclusive distributors who were not permitted to represent other companies’ products (p.10). These have also acted as strength for the company.
3.1.5 An Efficient Hardworking StaffOther than the ever hardworking Ahyan, Baser employed two additional managers and two support staffs at its Istanbul headquarters. These assistants followed up and monitored Baser’s plans as well as representing it at many international food shows around the world (Sriram & Bilgin, 2003, p.10). It is also acknowledged that since the top management of Ayhan and Mehmet had travelled regularly to foreign markets and created strategic plans, they had come to exercise patience when it came to making key decisions for the company.
3.1.6 Readily Available Raw MaterialsThe improved of climatic conditions in Turkey and the increased planting of new trees had encouraged olive oil production in the country. Also, increased tree care had raised production levels (Sriram & Bilgin, 2003, p.2). The harvested olives provided ready raw materials for the firm.
3.2 Weaknesses3.2.1 Weak Home EconomyCompared to other European countries, Turkey’s economy has existed as a relatively weak economy thus making it hard for Baser Food to compete successfully with firms that operate in strong economies for instance, those in USA. Baser Food Company was traced its motherland back to Turkey, a country which had been going through its worst recession in its history (Sriram & Bilgin, 2003, p.3). The country’s wholesale price index had also rapidly risen by 51.4% while its consumer price index had risen to a high of 54.9% (p.10).
3.2.2 Little Financial CapabilityThough Baser had spread its network in over 20 countries, the company still lacked the strength to pose a competitive challenge to established competitors in strong economies. This is shown when the company’s top management became confused and scared with the high costs and high risks associated with establishing an active presence in potential markets of USA or Australia. Sriram and Bilgin (2003) had opined that the company’s expansion programme had been held back by its resource constraints which forced it to prioritize (p.11).
3.2.3 Inability to “Mass Produce”Bayer, like any Turkish olive oil firm, had failed to utilize on the existing large volumes of harvested olives. As such, much of this produce was exported to Italian and Spanish countries which re-branded it to re-sell to countries of the World; Turkey included at competitive prices.
3.3 Opportunities3.3.1 An Increasing Olive Oil MarketThe olive oil market continues to widen as more people become health conscious. The market has expanded to incorporate USA, Spain, China, Australia and many other countries. The expanding market is likely to avail a ready market for Baser’s brands.
3.3.2 Continued ExpansionThe company’s top management has made expansion a top priority for the company. This is likely to give the company a competitive edge over its rivals.
3.3.3 Favorable Environmental and Climatic ConditionsThe improved climatic and environmental conditions in Turkey had increased production volumes. This has in provided Baser with ready raw materials.
3.3.4 Increasing Health Conscious SocietiesA growing health-consciousness among some segments of the societies have facilitated the adoption of olive oils across the world as healthy products (Sriram & Bilgin, 2003, p.3). This has helped in widening Baser’s market share.
3.3.5 The Variety of Benefits Associated With Olive OilsOlive oils have gained popularity due to a variety of benefits associated with them. Some of these benefits include the provision of basic fatty acids necessary for the body and the provision of high caloric value; besides some basic vitamins such as A, D, E and K (Sriram & Bilgin, 2003, p.3).
3.4 Threats3.4.1 Stiff Competition From RivalsBaser’s Cavallo D’Oro brand faced stiff competition both within Turkey and the international Markets. In Turkey, the brand received stiff competition from major brands that included Komili, Kristal, Bizim and Luna (Sriram & Bilgin, 2003, p.5).
3.4.2 Rising Inflation LevelsThe rising energy prices across the World have led to the emergence of a financial crisis which has caused high inflation rates across the World. Turkey’s economy has been no exception. Sriram and Bilgin (2003) argued that as a result of Turkey’s economic crisis, some olive oil consumers had been switching to cheaper brands (p.5). These effects are likely to lower Baser’s market share. Its production costs are also likely to increase in prices eating into their profits.
3.4.5 The “Expensive” Name Tag Associated With Olive Oil ProductsOlive oils have come to be associated with high prices and as such many lower class people have shied away from purchasing them due to their low income levels. This notion is likely to act as a threat to the success of the olive oil industry in Turkey.
3.4.6 Existence of Relatively Cheap Edible OilsTurkeys cooking oil market boasts of readily available and less expensive edible cooking oils such as sunflower and corn. As a result, many customers have shifted to their consumption as the economic crisis persists.
3.4.7 Olive FliesFlies had continued to harm trees thereby decreasing olive tree rates.
3.4.8 Poor Harvesting PpracticesThe hitting of olive oil tree branches to release the fruits continued to weaken the trees leading to prolonged regeneration and production periods for the affected trees.
3.4.9 Inadequate Government SupportThis proved to be a setback for the whole of Turkish olive oil sector. Baser Foods was not an execption (Sriram & Bilgin, 2003, p.103).
SECTION II: Using the Exporting Model to Select On Australia as the Most Viable Expansion Market for Baser
1.0 IntroductionThe increased effects associated with globalization have increased competitions amongst firms. In trying to address to these challenges, companies’ top managements have expressed willingness of expanding their activities to reach foreign markets. These companies have adopted different approaches to win on target clients in these regions, increase growth as well as increasing company’s profits. The selection of best market expansion strategies has therefore become of great importance to these companies. Tielmann (2010) avered that in choosing a market strategy, from the cheapest to the most expensive, companies-should, as a matter of fact, align their strategy to their objectives and adopt them to foreign market environments (p.1). Singh (2011) went on to name the following as the 4 models or mechanisms upon which a firm can expand into foreign markets; direct investment, joint venture, licensing and exporting.
In analyzing Baser’s case, this report adopted the exporting model which led to the proposing of Australia as the best potential market upon which the company can expand its activities to. It should be noted that the general market or product expansion strategy was adversely consulted when comparisons were done on the Australian and USA markets.
2.0 The Adoption of Exporting ModelIn choosing the exporting model, Baser will market and directly sale its domestically produced olive oil in Australia. This model is chosen based on the view that being an old and well established model of incorporating foreign markets, Baser stands to benefit from its many advantages. The following are some of the advantages which are likely to accrue to Baser in implementing the use of this model in Australian market;
Baser’s foreign key players will be agents in Australia who will have been familiar with the home market.
The company will have more control over its foreign market activities.
Direct exporting will lead to higher returns for the company (Tielmann 2010, p.7).
Baser will be able to overcome the only disadvantage associated with this model; that of overcoming entry barriers on the market. This is because Baser has already accumulated a lot of international experience having previously indirectly exported its oil products to foreign markets (Gavruchenko et al, 2005). Table 1: Comparing Varoius Entry Modes (Partly Adopted From QuickMBA, 2010)
Mode Conditions Favoring this Mode Advantages Disadvantages
Exporting Limited sales potential in target country; little product adaptation required
Distribution channels close to plants
High target country production costs
Liberal import policies
High political risk Minimizes risk and investment.
Speed of entry
Maximizes scale; uses existing facilities. Trade barriers & tariffs add to costs.
Transport costs
Limits access to local information
Company viewed as an outsider
Licensing Import and investment barriers
Legal protection possible in target environment.
Low sales potential in target country.
Large cultural distance
Licensee lacks ability to become a competitor. Minimizes risk and investment.
Speed of entry
Able to circumvent trade barriers
High ROI Lack of control over use of assets.
Licensee may become competitor.
Knowledge spillovers
License period is limited
Joint Ventures Import barriers
Large cultural distance
Assets cannot be fairly priced
High sales potential
Some political risk
Government restrictions on foreign ownership
Local company can provide skills, resources, distribution network, brand name, etc. Overcomes ownership restrictions and cultural distance
Combines resources of 2 companies.
Potential for learning
Viewed as insider
Less investment required Difficult to manage
Dilution of control
Greater risk than exporting a & licensing
Knowledge spillovers
Partner may become a competitor.
Direct Investment Import barriers
Small cultural distance
Assets cannot be fairly priced
High sales potential
Low political risk Greater knowledge of local market
Can better apply specialized skills
Minimizes knowledge spillover
Can be viewed as an insider Higher risk than other modes
Requires more resources and commitment
May be difficult to manage the local resources.
3.0 A Comparative Analysis Of The Two Markets
The following comparison justifies why Australia was the proposed market for Baser’s expansion. The table compares the strengths and weaknesses identified in the two potential markets; USA and Australia. Deductions are then made from the identified comparisons.
USA Australia
Strengths and opportunities
1. The USA market has over 50 brands. This is likely to offer stiffer competition to Base’s brands.
2. The country has rising olive oil import levels. It can be deduced that Baser stands to gain from this market since its products will be among those imported.
3. Olive oil consumption continues to increase as more people become health conscious. This implies that Baser will have a steady market if it chooses this market.
Risks and challenges
1. The variety of brands in the US markets is likely to stiffen competition leading to Baser experiencing high costs and low returns.
2. A whooping $2 million will be required to carry out a TV and print campaign. To add on the promotional costs, an additional $ 500,000 is needed to be spent in retail promotion. These costs can be too strenuous for a small multinational company like Baser.
3. For Baser to implement the exporting model in this country, it is required to Strengths and Opportunities
1. Relatively high per capita income. This is likely to act as an advantage since more people are likely to afford Baser’s olive oil.
2. The country has stable political and economic systems. These are likely to provide a smooth environment upon which the export trade is likely to flourish.
3. The country’s majority population consists of immigrants who have made foreign brands familiar to them. This is likely to act as an advantage for Baser’s olive oil brands.
4. The company’s olive oil market consists of 95% imports. This is more likely to provide a bigger market for Baser’s products.
5. The market is less competitive meaning that Baser can obtain high margins ranging from 25-30%.
Challenge
From Ahyan Statistics, only a $ 100,000 is needed for off-start. This is a relative little challenge which can be made by the small MNC.
establish stocking units for distribution purposes. Each stocking unit is to cost a total of $ 75,000. This is also appeared too expensive for the small MNC. 4.0 ConclusionFrom the comparisons done above, it is obvious that Baser should prefer to expand into the Australian market rather than the USA market. Though both markets avail a variety of opportunities to this small multi-national corporation (MNC), it is obvious that the strong challenges that the USA market offers are far beyond the reach of this small MNC. These challenges include those of high costs, low returns, high promotional cost and high costs of setting up stocking units. To Baser Food Company, the Australian market will act as a discovery of a new international market with a lot of future opportunities that remain promising.
5.0 ReferencesBuckley, PJ & Ghauri, PN (1999), The internationalization of the firm, 2 edn, Cengage Learning EMEA, Oxford.
Gavruchenko, T, Baltas, G, Fotis, C & Hadjidakis, S (2005), Comparative marketing strategies for organic olive oil: The case of Greece and Holland, Ministry of Agriculture, Greece.
Hassouna, V 2010, Virgin olive oil, Books on Demand, Norderstedt Germany.
Singh, V 2011, Strategic corporate expansion, Valore International, USA.
Sriram, S & Bilgin, Z 2003, Global marketing opportunity in the olive oil industry: The case of Baser Food, North American Case Research Association, USA.
The Olive Oil Source, 2011, Everything but the olive oil, viewed 28 March, 2011, < http://www.oliveoilsource.com/page/business-plan>.
The QuickMBA, 2010, Strategic management, Foreign market entry modes,viewed 28th March, 2011, < http://www.quickmba.com/strategy/global/marketentry/>
Tielmann, V 2010, Market entry strategies: International marketing management, GRIN Verlag, Norderstedt Germany.