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Global Strategy: Group 55

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Global Strategy: Challenges and Choices: Trimester B Assignment
Group 55: Dan Xu, Nguyen Trong Nguyen, Saad Alrajeh, Yupeng Zhang, Don Meyer

STOATS PORRIDGE OATS: GLOBAL OPPORTUNITY ASSESSMENT
Introduction
Step 1: Organizational Readiness to Internationalize
Step 2: Suitability to Foreign Markets
A. Strengths
B. Challenges
C. Solutions
Step 3: Initial Country Screening
A. Initial Country Screening
i. Methodology
ii. Results
B. Results
Step 4: Industry Market Potential
A. Market Size
B. Market Structure
C. Customer Attitudes
D. Current Imports and Trade Barriers
E. Local Competitors
F. Buyer Selection Criteria
G. Technology / Communications
H. Identification of Customers
I. Porters Five Forces Analyses
i. Brazil
ii. China
Step 5: Business Partners
A. Contract & Terms of Business
B. Access to Market
C. Identification of Potential Partners
Step 6: Sales Estimates
A. Prices
B. Promotions and Market Entry
Conclusions
References
Appendix
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NOTE TO DON
1. Correct the word Step & Stage in the Title of GMOA framework. For ex: I saw Stage 4 but
Step 3 & Step 6
2. Ive adjusted/corrected references for Step 3. The adjusted contents are highlighted GREEN
below.
3. Ive summarised the whole step 6 after crosschecking with GMOA theory. We missed so many
things. Please replace this step 6 with the existing part in our draft
4. The EXISTING STEP 6 in our draft should be moved into Appendix
5. Thats all ^^


STEP 3 official version simply copy &
paste to the draft
STEP 3: INITIAL COUNTRY SCREENING

A. Methodology
The Initial Country Screening attempts to identify systematically the best markets to target with
the chosen porridge products (oatmeal) and snack bars. Seven figures are adapted and
developed from Cavusgils GMOA framework, divided into subcategories which best correspond
with Stoats products, and then weighted on the basis of significance to Stoatss predicted initial
needs.
Scores are awarded between 4.00 and 1.00, with 4.00 being the highest possible score and 0.00
indicating non-existent or untenable conditions. (See Appendix A3-A for additional explanation)










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Figure 1: Initial Country Screening
1
.

1
Data sourced from Euromonitor (2014), MillerGroup, Corruption Perception Index (2013), World Intellectual Property Organisation (2012), and World Banks
Political Stability & Absence of Violence Index (2012). See Appendix A3-A for further information.

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B. Portfolio Analysis
The Portfolio Analysis correlates data from both Organisational Readiness and foreign Country
Screening. Two variances named Country Attractiveness and Competitive Strength are
compared on the basis of their interdependencies, with final results suggesting a resource
allocation among strategic market choices.
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(Refer to Appendix A3-A for additional rationale.)

Overview of Country Attractiveness and Stoatss Competitive Strength
Criteria Country Attractiveness Competitive Strength
Consumer
Capacity
Product offerings
Eating behaviours


Price sensitivity
Rich heritage food?

Oatmeal trends
Healthy food, 7++ tastes
Porridge box (for hot breakfast) &
porridge bars (for convenient snack)

Near-premium brand
100% Scottish origin, but can outsource
Infrastructure
Marketing platforms

Logistics

Production

Marketing-driven firm, specialised on e-
marketing activities
Not enough resources to build up their
own channel
Not good at managing large-scale
production line. Need to outsource this
activity.
Business
Environment
Import



Country risk &
financial stability
Stoats has limited resource to do
importing by itself. Any cost, risk, time
and effort involved should be
considered.
Budgeting for business etiquette can be
deployed given any meaningful return.
Also the targets perception upon
Scotland independence is important
Market Size &
Growth
Oatmeal market size &
growth
Population
GDP per capita
Short-term strategy is to exploit any
given well-established markets & target
on niche segments
The firm has limited resource to deploy
any massive PR campaign to convert
non-oatmeal consumers into its clients.
Figure xxx: Overview of Country Attractiveness and Stoatss Competitive Strength_____


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Harrell and Kiefer portfolio analysis matrix (1993)
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figure xxx: Portfolio Analysis: Stoats vs. Brazil, China, Saudi Arabia and Vietnam
C. Results (see Appendix A3-C for additional analysis)
1. Brazil, 3.34: Brazil earns top marks with its combination of established porridge and
snack bar consumption and projected rise in demand and consumption of health food
and snack products. Its well-established infrastructure ensures adequate avenues for
both marketing and distribution, along with an acceptance of foreign firms.
2. China, 2.69: China enjoys the largest market size for oats porridge, but constitutes a
minor market for snack bars as a result of low product awareness
3
. China also sports a
comparatively large consumption capacity for oat products, though this is hampered
by the strict regulation of foreign companies and risks.
3. Saudi Arabia, 2.55: Saudi Arabia, though third, surpassed Brazil and China in certain
categories, such as Demand Growth and Market Intensity. However, Saudi Arabias
final rating was ultimately handicapped by its smaller market size. Despite this, Saudi
demand for oats cereal products is steadily growing, though its lack of local oats
production necessitates a strong reliance on imports
4
.
4. Vietnam, 2.33: Vietnam takes last place with a score of 2.33 due to three major factors:
Miniscule breakfast cereal market, low GDP, and the governments current preference
of exportation to importation of food products.

3
Euromonitor International: Snack Bars in China. 8 January 2014. http://www.euromonitor.com/
4
Euromonitor International: Breakfast Cereals in Saudi Arabia. 27 January 2014. http://www.euromonitor.com/
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STEP 6 SIMPLY COPY/PASTE to the
draft

STEP 6: SALES ESTIMATES

Country Brazil China
Assumption Best Case Worst Case Best Case Worst Case
3-year sales
(Market shares value)
55 million 10 million 36 million 12 million
3-year expenses
(COGS = 83-95% sales)
45.6 million 9.5 million 30 million 11.4 million
3-year total income
(Sales Expenses)
9.4 million 0.5 million 6 million 0.6 million

This valuation is more of an art than a science (Berry, 2008; Cavusgil et al, 2008). To project revenues/expenses
figures the report combines both Method of Analogy and Proxy Indicators to make assumption.
Sales price is kept at companys current figures: 16/ 18 bars or 5.5/kg
Cost of Goods Sold (COGS) in food processing industry is benchmarked at 78-83% for premium brands
(CreditSuisse, 2014)
Get premium oatmeal sold in Brazilian market is more challenging than the Chinese as described in
Consumption behaviours in Step 3 and Step 4. Therefore:
o Brazil: assume Stoats can acquire 3% market shares value in first 3 years (0.5% for worst case)
o China: assume Stoats can acquire 9% market shares value in first 3 years (3% for worst case)
China shows less volatile sales figures in both good/bad cases than Brazil.
Five categories are used to form the hypothesis (i.e. Marketing, Distribution, Production, Competitive
Intensity, and Human Resources). Each category is divided into Operation Type (i.e. basic description),
Define Success/Threat (i.e. signal of achievement) and Tipping Point (i.e. signal of outstanding
success/failure).






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The following tables summarise details of assumption being made for the projected 3-year revenues and expenses
above. For more explanation, please refer to Appendix X
Best Case
(Year ended 2017)
Marketing Distribution
Competitive
intensity
Human resources Production
Operation type
Self-run e-marketing
using social
networks pages only
One of 4 partners
indicated above
Outsource whole
importing processes
No-direct
competition
High risk-tolerance &
commitment. Accept
commission paid.
Imported from
Scotland
Material occupies
35-50% COGS
(CreditSuisse, 2014)

Define success
Acquire >1% local
oatmeal consumers
& convert them into
interactive clients
Wholly support Stoats
to solve problems
Effective just-in-
time
No premium goods
are launched
No price-squeeze
tactics upon Stoats
Local team is
proactive to develop
sales/brand
strategies
70% imported from
Scotland
Find satisfying local
producers
Tipping point
Successfully sell
products & run PR
campaign in social
events
Retailers are willing to
promote Stoats to
their buyers
Competitors create
their own
differentiate
strategies
Local team is proud
of staying in this
venture
Acquire favourable
terms with local
producers
Figure xxx: Details of assumption made on Best Case

Worst Case
(Year ended 2017)
Marketing Distribution
Competitive
intensity
Human resources Production
Operation type
Self-run e-marketing
is not enough
Only poor-established
partners are
interested
Importing processes
must partially perform
by Stoats
Domestic companies
jump in the
competition
Low risk-tolerance &
commitment. Accept
fixed paid.
Imported from
Scotland

Define threats
Acquire <1% local
oatmeal consumers
& cant convert
them into
interactive clients
Not support Stoats to
solve problems
Deficient product
availability in stores
Premium goods are
launched, price-
squeeze tactics are
used, trademark is
violated
Local team is passive
to develop
sales/brand
strategies
100% imported from
Scotland
No satisfying local
producers are found
Tipping point
Anonymous
campaigns are
launched to attack
Stoats
Retailers put Stoats
products behind
competitors goods
Consumers believe
that competitors
products are better
Local team attempts
to dig money from
this venture
No local producers
support a Scottish
brand
Figure xxx: Details of assumption made on Worst Case


Source used in Ste 3 & Step 6:
Cavusgil T., Knight G., and Riesenberger J. (2008) International Business: Strategy, Management and the New
Realities, Pearson, London.
CreditSuisse (2014) Packaged Food Review 2014, Credit Suisse Securities Research & Analytics, Credit Suisse.
Berry T, (2008) The-Plan-As-You-Go Business Plan, Entrepreneur Press.
Harrell G.D. and Kiefer R.O. (1993) Multinational Market Portfolios in Global Strategy Development, International
Marketing Review, Vol. 10-1.

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