bos brands: challenges and choices faced by an...
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BOS Brands: Challenges and choices faced by an
internationalising medium-sized South African venture
Teaching Case Study
A Research Report presented to
The Graduate School of Business
University of Cape Town
In partial fulfilment of the requirements for the Master of Business Administration Degree
Christopher Human December 2015
Supervised by: Professor Geoff Bick
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Abstract
Many studies have been conducted regarding the internationalisation strategies and processes
employed by large firms as they seek new markets for their respective products and services.
Increasingly, however, smaller entrepreneurial businesses are venturing abroad, often earlier in their
development and with significantly less capital than their corporate equivalents. This phenomenon,
referred to as "Born Global", is underrepresented in much of the existing literature. Current theory
typically focuses on larger multinational corporations, as do the vast majority of textbooks and the
case material usually encountered in the classroom. In addition, most teaching cases cover the
internationalisation of developed market enterprises, either into other developed markets or their
emerging market counterparts. There is thus a particularly notable shortage of cases that explore
internationalising SME companies from emerging market contexts.
BOS Brands is just such a company and provides an interesting and engaging case around which to
elaborate on the internationalisation experience of a Born Global firm. This medium-sized South
African business develops, distributes and markets Rooibos-based beverages in Southern Africa and
Europe, with eyes on a broader global presence. The resulting case provides insight into the
strategic decisions required to successfully take a medium-sized business into competitive foreign
markets without the capital and support enjoyed by many larger multinational corporations. Among
other issues, BOS Brands provides fertile ground to explore the selection of target country and entry
mode, overcoming cultural and physical distance, opportunity recognition and the roles of networks
and innovation.
The research report takes the form of a teaching case, designed to assist MBA level students of
Marketing, Strategy, Innovation and Entrepreneurship in understanding the many interrelated
challenges and issues that businesses and brands face as they move across borders. In addition, this
research report is designed to fulfil a secondary function: to inspire students in emerging market
contexts to contribute to the development of products, services and brands that can compete in
international markets.
Key Words:
Internationalisation, Born Global, Emerging Markets, South Africa, SME, Brand, Marketing,
Distribution, SME (Small and Medium Enterprises), FMCG (Fast Moving Consumer Goods)
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Plagiarism Declaration I know that plagiarism is wrong. Plagiarism is to use another’s work and pretend that it is one’s own. I have used a recognised convention for citation and referencing. Each significant contribution and quotation from the works of other people has been attributed, cited and referenced. I certify that this submission is my own work. I have not allowed and will not allow anyone to copy this essay with the intention of passing it off as his or her own work - Christopher James Human HMNCHR001
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iii BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
Table of Contents
1. Introduction and Context .................................................................................................... 1 1.1 Background .................................................................................................................................... 1 1.2 Case Theme and Purpose ............................................................................................................. 2 1.3 Learning Relevance and Objectives ............................................................................................ 3 1.4 Limitations ..................................................................................................................................... 6 1.5 Assumptions ................................................................................................................................... 6 1.6 Ethics .............................................................................................................................................. 6 1.7 Abbreviations ................................................................................................................................ 7
2. Literature Review ................................................................................................................. 8 2.1 Introduction ................................................................................................................................... 8 2.2 International Entrepreneurship .................................................................................................. 8
2.2.1 The “Born-Global” Firm .......................................................................................................... 9 2.2.2 Born-Global: Capabilities and Skills ..................................................................................... 10 2.2.3 Born-Global: Innovation Orientation ..................................................................................... 11 2.2.4 Born-Global: Performance ..................................................................................................... 12
2.3 Internationalisation ..................................................................................................................... 14 2.3.1 Opportunity Recognition ....................................................................................................... 14 2.3.2 International Market Entry..................................................................................................... 15 2.3.3 Internationalisation Stages ..................................................................................................... 17 2.3.4 Marketing and the Internationalising Firm ............................................................................ 19
2.4 Geographic, Psychic and Cultural Distance ............................................................................. 20 2.4.1 Geographic Distance .............................................................................................................. 20 2.4.2 Psychic and Cultural Distance ............................................................................................... 21 2.4.3 Product Acceptance of Foreign Brands ................................................................................. 22
2.5 Conclusion .................................................................................................................................... 25
3. Methodology ....................................................................................................................... 27 3.1 Case Study Content ..................................................................................................................... 28 3.2 Case Subject Selection ................................................................................................................ 28 3.3 Research Design .......................................................................................................................... 29 3.4 Data Sources and Collection ...................................................................................................... 31 3.5 Data Analysis ............................................................................................................................... 32 3.6 Teaching Note .............................................................................................................................. 33
4. Case Study ........................................................................................................................... 34 4.1 Introduction ................................................................................................................................. 34 4.2 Background .................................................................................................................................. 35
4.2.1 The Ice Tea Market ................................................................................................................ 35 4.2.2 The BOS Team ...................................................................................................................... 36
4.3 The BOS Brand ........................................................................................................................... 37 4.3.1 Positioning: Healthy and Fun ................................................................................................ 37 4.3.2 A Brand-Led Business ........................................................................................................... 39
4.4 Internationalisation ..................................................................................................................... 40 4.4.1 Born to be Global ................................................................................................................... 40 4.4.2 Target Region/Country .......................................................................................................... 41 4.4.3 Entry Mode ............................................................................................................................ 42
4.5 BOS in Europe ............................................................................................................................. 43 4.5.1 Internationalisation Stages and Timeline ............................................................................... 43 4.5.2 Competitive Environment ...................................................................................................... 44 4.5.3 Distribution and Sales ............................................................................................................ 46
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4.6 Building an Effective Challenger Brand ................................................................................... 47 4.6.1 High-Touch Networks ........................................................................................................... 47 4.6.2 A Fresh Approach to Marketing and Brand Building ............................................................ 49 4.6.3 An Emphasis on Creativity and Innovation ........................................................................... 52
4.7 Ongoing Internationalisation Challenges ................................................................................. 53 4.7.1 Psychic/Cultural Distance ...................................................................................................... 53 4.7.2 Country of Origin Role .......................................................................................................... 54 4.7.3 Legislative and Legal Hurdles ............................................................................................... 55
4.8 Conclusion .................................................................................................................................... 56 4.8.1 Opportunities Near and Far.................................................................................................... 56
4.9 Discussion Questions and Assignment ...................................................................................... 58 4.9.1 Questions for General Discussion (for preparation before session 1) ................................... 58 4.9.2 Group Assignment (for preparation before session 2) ........................................................... 59
4.10 Case Exhibits ............................................................................................................................. 60 4.10.1 Exhibit 1. The Global Ice Tea Market (source: Bos, 2015) ................................................. 60 4.10.2 Exhibit 2. Ice Tea Market and Competitors – South Africa (source: Bos, 2015) ................ 61 4.10.3 Exhibit 3. Marketing and Activations 2015 – Netherlands (source: Bos, 2015) ................. 62 4.10.4 Exhibit 4. On-Premise / HORECA Merchandising Examples (source: Bos, 2013) ............ 63 4.10.5 Exhibit 5. Sales Contribution and Growth by Region (source: Bos, 2015) ......................... 64
5. Teaching Note ..................................................................................................................... 65
6. Conclusion ........................................................................................................................... 65
Reference List ............................................................................................................................. 67
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List of Figures Figure 1.1 BOS 275ml Ice Tea Cans (Source: BOS Brands, 2013) ............................................ 2
Figure 1.2 BOS Brands guerilla marketing activations (Source: BOS Brands, 2013) ................ 3
Figure 3.1 Teaching Case Research Process (Source: Adapted from Woodside, 2010, p.35) .. 30
Figure 3.2 Data Analysis Triangulation (Source: adapted from Woodside, 2010, p.35) ........... 32
Figure 4.1 BOS' Founding Team includes Dave Evans, Grant Rushmere, Richard Bowsher, Marié van Niekerk ................................................................................................................ 37
Figure 4.2 BOS' Current Ice Tea Range in Standard 275ml Tall Format Cans ......................... 38
Figure 4.3 BOS' Global Presence - 2015 ................................................................................... 42
Figure 4.4 BOS' Internationalisation in Europe 2010 – 2016 .................................................... 43
Figure 4.5 BOS Competitive Positioning Matrix (source: BOS, 2013) ..................................... 45
Figure 4.6 BOS' Target Audience Segments (source: BOS, 2013)............................................ 49
Figure 4.7 BOS famous cycling giraffes on the streets of Cape Town (source: BOS, 2012) .... 50
Figure 4.8 BOS Sport Drinks launched in January 2014 ........................................................... 52
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List of Tables Table 1.1 Case Relevance in Relation to Learning Objectives .................................................... 4
Table 2.1 Linkages between Literature, Teaching Objectives and Questions ........................... 25
Table 3.1 Case Study Type Matrix ............................................................................................ 27
Table 5.1 Teaching Plan 1: Single Lesson ................................. Error! Bookmark not defined.
Table 5.2 Teaching Plan 2: Double Lesson ............................... Error! Bookmark not defined.
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1. Introduction and Context
1.1 Background
The expansion of FMCG brands and businesses across national and cultural borders is a well-
documented phenomenon, as is the increasing prevalence of international business and trade
(The World Trade Organisation, 2013). Traditionally such internationalisation has largely been
the domain of multinational corporations (MNCs), with the resources and knowledge to build
the required distribution channels and awareness of their products and services in foreign
markets (Brouthers, Brouthers, & Werner, 1996). More recently however, larger numbers of
SMEs and international new ventures have begun to venture abroad and many of these have
been founded with international ambitions (Karra, Phillips, & Tracey, 2008). Furthermore, an
increasing proportion of these firms, in turn, originate in developing markets (Luo & Tung,
2007).
BOS Brands (pronounced like rooibos) is just such a company. With rapidly increasing revenues
(2015 annual revenue growth to date is close to 100%) and income now in the region of R100
million per annum (BOS Brands, 2013), BOS is recognised as a local success story. To many,
their iconic ice tea cans (see figure 1.1) and 1 liter Tetrapaks are a familiar sight in the fridges of
local coffee shops, convenience shops and upmarket grocery stores.
BOS Brands’ product range is based on organic rooibos essence (with the raw rooibos
ingredient sourced from the Klipopmekaar farm in the Cederberg region of the Western Cape).
BOS’ flagship product is its lemon ice tea, which along with five other permanent and
occasional limited edition flavor variants, is available in 275ml cans, 500ml and 1 Liter
Tetrapak containers. BOS Brands also produces organic rooibos tea bags, an isotonic BOS
sports drink range and a new sparking ice tea variant.
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Founded by South Africa entrepreneurs Grant Rushmere, Dave Evans and Richard Bowser, the
business was launched in June 2010. The product development was largely informed by the
identification of a gap in the market (for healthy, trendy soft drinks) and the involvement of
Bowser, a partner and successful Silicon Valley entrepreneur who at that time owned the
Klipopmekaar rooibos farm. The business launched with shareholders that included the three
founders, local venture capital firm Invenfin, Endurance Trust and Sir Alex Ferguson (former
Manchester United manager) (BOS Brands, 2013).
African
symbolism and a distinctive rooibos taste imbue the brand with local associations however, the
BOS product, brand and business model were developed, from inception, with international
markets in mind (Evans, 2015). After considering a variety of global markets, the BOS brand
and management team settled on Northern Europe and began their expansion into the
Netherlands and Belgium. The selection of these target countries was based on considerations
that included market size, competitive environment and language / cultural similarities (Evans,
2015). The brand is now also present in France, Spain, Sweden and Switzerland and the BOS
management team is looking to continue on their international expansion path.
1.2 Case Theme and Purpose
The dominant theme of this teaching case is the critical role of strategic decision making in
informing the expansion of entrepreneurial ventures into foreign markets. Furthermore, this case
explores some of the complexities and nuances of international entrepreneurship, opportunity
Figure 1.1 BOS 275ml Ice Tea Cans (Source: BOS Brands, 2013) Copyright UCT
3BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
recognition and evaluation, international marketing and market differences (with particular
reference to cultural and psychic difference).
The purpose of this case is to provide students with a practical understanding and appreciation
of international entrepreneurship and the complexity of the internationalisation process and
related strategic choices as they apply to a medium sized entrepreneurial venture. The case’s
secondary purpose is to inspire business students to see the potential that lies within
strategically-driven emerging market ventures, especially those that have demonstrated the
vision and will to succeed in global consumer markets.
An effective case must be designed to engage their specific audience. This in turn requires an
interesting narrative that captivates and immerses the reader (Yin, 2009). BOS Brands is not
only a well-known and widely appreciated brand but also has a history of successfully
employing non-traditional and even irreverent marketing tactics (see figure 1.2 below). In
addition, BOS Brands’ South African character, youthful founders and ‘David and Goliath’
success in the saturated local soft drinks market increases the likelihood that this case will be
well-received by students.
Figure 1.2 BOS Brands guerilla marketing activations (Source: BOS Brands, 2013)
1.3 Learning Relevance and Objectives
Based on this teaching purpose, the primary target audience for this case can be specified as
business students and in particular students of marketing and of entrepreneurship. It is important
to specify this up front as cases must build upon the theory with which this audience is likely to
be familiar (Heath, 1998).
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In addition to its interest appeal, this teaching case derives value from its novelty in two
respects. Firstly, it illuminates a topic that is underrepresented in the contemporary MBA
classroom: international entrepreneurship. Secondly, it studies the specific case of a successful
South African (emerging market) firm. Sleuwaegen and Onkelinx (2014) find that international
new ventures experience significantly higher failure rates than their MNC counterparts. BOS
CEO Dave Evans (2015) confirms that the internationalisation process for a medium-sized
business such as BOS is characterised by challenging strategic decisions and tradeoffs. Yet
despite the growth of international entrepreneurship, many international marketing textbooks
include little or no content relating to this phenomenon (e.g. Onkvisit & Shaw, 2009; Kotabe &
Helsen, 2008; Burgess & Bothma, 2007; Bradley, 2002). As the government of South Africa
and other emerging countries look to support the expansion of local business abroad, there is an
opportunity to encourage discussions and learning about issues related to international
entrepreneurship.
The objective of this case is to assist students in synthesising and building on their knowledge of
the associated subjects (entrepreneurship and international marketing). As a result, the BOS
teaching case is designed to fulfill the following learning objectives:
Table 1.1 Case Relevance in Relation to Learning Objectives
LEARNING OBJECTIVE BOS TEACHING CASE
1. Consider the various factors informing the
decision of ‘born-global’ SMEs to
internationalise at or close to inception.
BOS’s business model and product were
developed with the intention to enter
international markets and this was based on a
variety of strategic reasons.
2. Analyse the decision-making process of the
internationalising SME in terms of
evaluating potential target countries and
entry modes.
A number of geographical target-country and
entry mode options were considered by BOS’
management.
3. Understand the complexities of marketing
BOS’ marketing team have come up against a
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in a foreign cultural and business context
(psychic and physical distance).
series of legislative and other hurdles in their
attempts to market their unique South African
product abroad.
4. Appreciate the ways in which
internationalisation challenges might be
different in the entrepreneurial (as opposed
to traditional) case.
As a relatively small beverage FMCG
company, BOS’ management has had to use
their agility and creativity to overcome
challenges in the absence of extensive
internationalisation budgets.
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1.4 Limitations
As a predominantly descriptive single-case study, it is important to note that the findings of the
research conducted apply to this particular case only and cannot be generalised to all cases of
international entrepreneurship. In addition, the case focuses on the experiences and strategic
decisions faced by the firm’s management and, in particular, CEO Dave Evans. Caution should
therefore be exercised that the resulting knowledge is not interpreted as an empirical and
unbiased picture of the organisation or an inference of broader organisational culture. The BOS
Brands case necessarily takes on a subjective character and students and lecturers are invited to
view the business situation from a management perspective. Only information made available
by the management team and cleared for dissemination in the public domain is included in this
account of the BOS Brands internationalisation case.
1.5 Assumptions
It is assumed that all information that has been provided by BOS Brands and its management is
accurate and factually sound. In addition, it is assumed that all information volunteered during
the interview stage of the research process is correct (where such information does not conflict
with information in the documentation provided or gathered during other in-depth interviews).
Where a conflict did arise, clarity was sought or the information was omitted.
It was further assumed that BOS Brands will remain a going concern over the research and case-
writing process.
1.6 Ethics
The preparation of this case and related research was done in accordance with a Memorandum
of Understanding agreed to by BOS CEO, Dave Evans on behalf of the organisation. In terms
thereof, it is noted that BOS and its appointed representatives retained the right to remove
content of a confidential nature from the final research paper and written case before
submission. It was further agreed that the final draft would be submitted for review by BOS and
its appointed representatives in due course. This process was completed 1 December 2015.
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Interview and case study research in general are highly susceptible to bias and inaccuracy due to
their potentially subjective nature and linear narrative style respectively (Fowler, 2009; Yin,
2009). Although certain information was altered to protect sensitive data, the author was
committed to retaining the integrity of the narrative and so did not fabricate material facts and
actively avoided bias in order to produce as accurate a reflection of reality in the classroom as
possible (Yin, 1994).
1.7 Abbreviations
To assist in achieving readability, certain abbreviations are employed throughout this research
report. These include the following, which have been used for ease of reference:
AH Albert Heijn (supermarkets) ATL Above The Line B2B Business to Business FMCG Fast Moving Consumer Goods HORECA Hotel, Restaurant and Café Trade (On-Consumption) MNC Multinational Corporation NPD New Product Development OLI Ownership-Location-Internationalisation Model PR Public Relations R&D Research and Development SME Small and Medium Size Enterprise
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2. Literature Review
2.1 Introduction
The purpose of this literature review is to provide a theoretical context to this BOS Brands case
ensuring that its learning objectives are met within the context of contemporary thinking on
related topics (Woodside, 2010). The teaching case describes a specific example of international
venturing as experienced by a South African “born-global” enterprise. Its emphasis is on market
and marketing related considerations and decisions by the BOS Brands management team (in
particular, its CEO) as the business expands into Europe and, possibly, beyond. This literature
review therefore examines the extant research and key theoretical models and paradigms as they
relate to the broader fields of international entrepreneurship, internationalisation (including
international marketing) and geographic, cultural and psychic distance.
2.2 International Entrepreneurship
The increasing prevalence of international entrepreneurship in recent decades has been
recognised as an important phenomenon worthy of academic enquiry (e.g., Gerschewski, Rose,
& Lindsay, 2015; Knight & Cavusgil, 2004). This is, in part due to the rapidly increasing
proportional contribution of such firms to global trade (Knight, Madsen, & Servais, 2004).
Oviatt and McDougall (1999) note further that the increasing incidence of internationalisation
among relatively small and new organisations has been widely observed. Karra, Phillips and
Tracey (2008) state therefore that the conception of international trade as the exclusive purview
of large multinational enterprises has come under scrutiny as a result.
The number of entrepreneurial organisations based in emerging markets and venturing abroad
has also been increasing rapidly (Luo & Tung, 2007). This is at least partly explained by the
general global international entrepreneurship trend driven by the improved availability of
communications technology and knowledge amongst other factors (Knight & Cavusgil, 2004).
Explaining the case of emerging market firms in particular, Luo and Tung (2007) propose a
springboard perspective by which emerging market firms attempt to overcome their latecomer
disadvantage by acquiring strategic resources, markets and knowledge abroad. Alternatively,
Kropp, Lindsay and Shoham (2006) adopt a resource perspective, emphasising the creative and
innovative nature of firms that have been developed in emerging market conditions and the
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appropriateness of these factors in international venturing. They further establish an empirical
link between the performance of international small and medium sized business ventures in
South Africa to their entrepreneurial orientation and their innovativeness and creativity in
particular (Kropp et al., 2006). It should be noted that these two perspectives are not mutually
exclusive.
Taken together, it would appear that the world of global business has been changing. This has
largely been reflected in the increasing academic interest in the topic of international new
ventures, which Oviatt and McDougall (1994) define as a growing and important type of startup
that “from inception, seeks to derive significant competitive advantage from the use of their
resources and the sale of outputs in multiple countries” (p.49).
2.2.1 The “Born-Global” Firm
The concept of born-global firms and of global start-ups as well as that of international new
ventures are broadly interchangeable (Knight et al., 2004). While the size of these entities and
the nature of their products and services are highly variable, they have in common a desire and
willingness to create new products and bring these products to new markets (Karra et al., 2008).
Knight and Cavusgil (2004) define “born-globals” as firms that seek to sell their services or
products in international markets on or near to their founding (p. 124). Born-global firms are
closely linked to the process and orientations associated with international entrepreneurship and
can be conceptualised as both its proponent and product. The period between establishment and
foreign market entry is frequently under three years (Knight & Cavusgil, 2004). While born-
global firms need not be small or medium sized enterprises, an increasing number are (Karra et
al., 2008). In comparison to larger multi-national enterprises, which are typically slower to
internationalise, these firms internationalise quickly but are often faced with a relative scarcity
of resources as a result (Knight & Cavusgil, 2004).
The increase in the number of born-globals in the 1990s is attributed by Madsen and Servais
(1997) to three factors: technological facilitation (particularly with regard to transport and
communication), more favourable market conditions and a more internationally minded
generation of entrepreneurs. Knight and Cavusgil (2004), on the other hand, point to two
contextual sources support for the rise of born-globals: globalisation of markets (including a
trend towards homogenisation of consumer tastes) and the proliferation of cost effective
communication and transportation technologies. In addition they point to the small size and
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related agility of these ventures as an advantage in a world that is changing with increasing
rapidity (Knight & Cavusgil, 2004).
2.2.2 Born-Global: Capabilities and Skills In addition to posing challenges, Knight and Cavusgil (2004) suggest that the small size of
Born-globals may also be an advantage as it allows these enterprises a degree of flexibility and
agility. Karra et al. (2008) further propose that three entrepreneurial qualities are critical to born-
globals’ success: “international opportunity identification, institutional bridging and a capacity
and preference for cross-cultural collaboration” (p. 440).
International opportunity identification is defined by Chandra, Styles and Wilkinson (2009) as
“the recognition and exploitation of entrepreneurial opportunity that leads to new international
market entry” (p.1). As with domestic opportunity identification, international opportunity
identification can take place through active search, fortuitous discovery or creativity and
imagination (Karra et al., 2008). However Karra et al. (2008) argue that international
opportunity identification is more complex and requires the addition of international knowledge
and cultural sensitivity. Muzychenko and Liesch (2015) concur, noting that the liabilities of
foreignness and outsidership make international opportunity identification difficult.
Furthermore, they argue that the skills required to overcome these and to identify and exploit
international opportunities are largely aligned with entrepreneurial behaviours (Muzychenko &
Liesch, 2015).
Institutional bridging refers to the ability of internationalising firms to close the gap between
local and international markets and overcome differences between business environments (Karra
et al., 2008). This is largely dependent, in turn, on the knowledge acquired by (or available to)
the firm and relating to the target countries (Cavusgil & Knight, 2009). This perspective is
commensurate with the emphasis placed on knowledge and networks by scholars such as
Sharma and Blomstermo (2003), who apply a network oriented view of business to explain the
existence and behaviour of born-global firms. Based on their analysis, Karra et al. (2008) outline
three facets of institutional bridging: knowledge about potential customers and their buying
behaviour, knowledge of the cultural norms and nuances as they pertain to commercial
transactions and an understanding of the legal and regulatory environments in the target country
(p. 448).
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The third capability of born-global entrepreneurs, as identified by Karra et al. (2008), is a
preference for cross cultural collaboration, which the authors define as “the capacity to develop
complex cross-cultural social relationships in order to build international ties with partners
across different parts of the supply chain” (p. 449). This in turn requires awareness and
reduction of psychic distance on the individual level to assist managers in embracing the
cultures of target countries (Sousa & Bradley, 2006). Karra et al. (2008) distinguish two
components of successful cross-cultural collaboration: “the ability to identify and select
competent partners” (p. 449) and “the capacity to interpret and assimilate knowledge and
information from across the network” (p. 450). These and other skills required to overcome the
business challenges associated with psychic, cultural and physical distance are discussed in
greater detail in the section entitled “Geographic, Psychic, and Cultural Distance”, which
follows.
2.2.3 Born-Global: Innovation Orientation
In addition to the skills and capabilities outlined above, Knight and Cavusgil (2004) argue that
innovation is an especially important attribute of born-global firms as it assists these
organisations in overcoming their resource disadvantage. Furthermore they state that an
innovative culture is common amongst born-global firms as their internationalisation is itself an
act of innovation (Knight & Cavusgil, 2004, p.126). Adopting a resource based view of the
firm, Knight and Cavusgil (2004) argue that an innovative culture allows for the development of
knowledge and organisational capabilities that can become sources of comparative advantage in
the relevant absence of tangible assets and capital. In their study of emerging economy firms,
Yiu, Lau, and Bruton (2007) similarly identify innovation as a factor which relates positively
with international venturing across the majority of 274 companies studied.
Oviatt and McDougall (1994) on the other hand, frequently frame innovation as an enabling
external condition. They note that the increasing availability of technological innovations and
the number of business people with international exposure have enabled the relatively early
internationalisation of new ventures in recent decades. Like Knight and Cavusgil (2004), Oviatt
and McDougall (1999) originally defined international entrepreneurship as essentially
innovative: “new and innovative activities that have the goal of value creation and growth in
business organisations across national borders” (p. 903). More recently, they added proactivity
and risk-seeking behaviour to their definition (McDougall & Oviatt, 2000).
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Baronchelli and Cassia (2014) have focused on the ability of born-global firms to bring
innovations to the market in the form of new products and services. This ability, in turn, is the
result of a number of factors including the Born-global firm’s relatively nimble nature as well as
the exposure to innovative ideas through contact with international networks (Baronchelli &
Cassia, 2014). This is in line with Utterback and Abernathy (1975) who attribute the ability of
innovative new firms to out-maneuver larger, older competitors to these new firms’ relative
agility and fluid approach to operations. Knight and Cavusgil (2004) assert that it is this
resulting innovative ability, in addition to a strong proclivity to pursue international markets,
that ultimately lead to internationalisation at an earlier point in the born-global firm’s
development. Zijdemans and Tanev (2014) point out however that there are differing points of
view within the current literature regarding the causal relationship between innovativeness and
early internationalisation. They note that while some authors such as Knight and Cavusgil
(2004) and Baronchelli and Cassia (2014) describe innovation as the independent variable, there
are others such as Hessels and Stel (cited in Zijdemans & Tanev, 2014) who attribute the
gaining of innovative capabilities to the skills acquired as a result of internationalisation.
These differing areas of emphasis and relational descriptions do not appear to be mutually
exclusive but rather suggest a multifaceted relationship between born-global firms and
technology as enabler, condition and differentiator. In line with the findings of Zijdemans and
Tanev (2014), existing literature points to a strong and positive relationship between innovation
and early internationalisation. Taken together, these perspectives challenge theoretic orthodoxy
such as the innovation model proposed by Bilkey and Tesar (1997), Czinkota (1982) and others.
Like the Uppsala model discussed later in this report, the innovation model describes
internationalisation as a slow, piecemeal process with management gradually acquiring the
knowledge and skills required to make innovation possible (Knight et al., 2004). In contrast, in
the case of the born-global firm, innovation is broadly understood to be an agile and
unstructured process that encompasses an element of risk-taking (Zijdemans & Tanev, 2014).
2.2.4 Born-Global: Performance
Much existing theory regarding the characteristics and nature of born-globals centres around the
factors that drive their early internationalisation. A smaller number of studies have attempted to
operationalise their performance over time and understand the factors that influence this
(Trudgen & Freeman, 2014). Some such studies adopt a purely resource-based perspective,
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often with an emphasis on intangible resources including knowledge (e.g. Knight & Cavusgil,
2004). Others seek to understand the born-global based on a pure knowledge-based view or
from an organisational learning or network perspective (Gerschewski et al., 2015). Freeman and
Cavusgil (2007) adopt a combined approach, employing both the network perspective and
resource based view, which they see as complimentary, to examine born-globals and their
performance. Gerschewski et al. (2015) similarly prefer this integration of theoretical
frameworks, noting that the resulting understanding of firm behaviours and performance is more
holistic and complete. The resulting paradigm emphasises both the relationships and knowledge-
building that exists outside the boundaries of the firm and the firm’s internal capabilities and
resources (Gerschewski et al., 2015).
In terms of defining success with reference to internationalisation, Kuivalainen, Sundqvist and
Servais (2007) delineate three measures based on existing literature: time-based, scale-based and
market-scope. Trudgen and Freeman's (2014) study provides a good example of the former,
which considers performance based in large part on the speed at which internationalisation took
place. This investigation is useful in that it takes into consideration three distinct phases of born-
global development: early start up, international entry and growth / consolidation (Trudgen &
Freeman, 2014). Scale measures, on the other hand, relate to the size of international operations
achieved – often as a percentage of total turnover. Finally, Knight et al. (2004) consider
performance of born-global firms in light of market-scope. Their approach is particularly
valuable when examining firms with limited resources or where psychic distance is a factor
which requires mitigation (Kuivalainen et al., 2007). In the study conducted by Gerschewski et
al. (2015), a broader set of business performance indicators are used including financial,
operational and perceived success.
Additionally, Gerschewski et al. (2015) consider a broad range of potential antecedents to born-
global success, some of which (including innovativeness, proactivity, product quality and
competitor orientation) were shown to have a positive impact on performance. Knight et al.'s
(2004) study, on the other hand, focuses exclusively on marketing antecedents, linking four of
these back to international performance defined in terms of market scope (adapted from Knight
et al., 2004):
• Foreign customer focus
• Marketing competence
• Product quality
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14BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
• Differentiation strategy
2.3 Internationalisation
2.3.1 Opportunity Recognition
Internationalisation can itself be perceived as an opportunistic act with international expansion
potentially benefiting the SME in a number of ways (Chetty & Campbell-Hunt, 2003). In
addition to the opening up of foreign revenue streams, possible advantages of
internationalisation include the achievement of economies of scale and the accessing of new
investment opportunities, technologies and skills (Eberhard & Craig, 2013). Despite involving
difficult trade-offs, Muzychenko and Liesch (2015) define opportunity identification as
“entrepreneurship in action” (p.385) and for born-globals, it is a right of passage (Ellis, 2011).
In a study of 665 entrepreneurial exchange ventures Ellis (2011) found that 87% of foreign
opportunities were discovered rather than sought (p.121) but that these discoveries resulted from
the presence of social connections and networks. Ellis (2011) further found that luck was not a
contributing factor to the identification of foreign opportunities.
Muzychenko and Liesch, (2015) claim that international opportunity identification is
behavioural in nature and offer a behavioural model of international opportunity identification
that includes “a desire to build a world class enterprise” and “a passion for cross-cultural
encounters” (p.7). Ellis (2011) agrees, proposing that it is a subjective process that is
determined, to a large extent, by ties with others with access to and knowledge of foreign
markets. Ellis' (2011) found that close to 40% of foreign opportunities resulted from social ties,
concluding that “social ties with known others provide access to distant and valuable
opportunities” (p.121). The role of organisational and personal networks have both been
emphasised (Eberhard & Craig, 2013).
A network perspective may also be helpful in shedding light on the way in which initial
opportunities are unearthed and exploited (Gerschewski et al., 2015). For instance, Johanson and
Mattsson (1988) suggest that networks are an important source of initial ideas, motivation and
support for international venturing. Eberhard and Craig (2013) make extensive reference to
network theory as an explanatory paradigm applicable to opportunity “exploration” (as well as
“exploitation”) amongst SMEs. The network model of internationalisation “suggests that a
firm’s intention to venture abroad is triggered and facilitated by the contacts in its existing
networks” (Eberhard & Craig, 2013, p. 387). Like Muzychenko and Liesch (2015) however,
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15BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
they see the exploration as taking place primarily at the individual level. Similarly, Ellis (2011)
sees opportunity recognition as a subjective process that relies heavily on the individual
entrepreneur’s social ties (p. 99). In an earlier paper, Ellis (2000) discusses three mechanisms
through which these social ties can aid in opportunity recognition. These include bringing
opportunities to light, evaluating new network or exchange partners and providing access to the
knowledge required to underpin further innovation (Eberhard & Craig, 2013, p. 388).
In the revision of their Uppsala Internationalisation model, Johanson and Vahlne (2009)
explicitly take into account this increasingly relational perspective on global business
opportunity recognition. The clearest manifestation of this shift is their replacement of the
‘liability of foreignness’ concept with ‘liability of outsidership’, indicating that they now view
networks as a more important unit of analysis than the national or cultural boundaries they often
cut across (Johanson & Vahlne, 2009). This takes as one of its core premises the network model
of internationalisation, proposed by Johanson and Mattsson (1988), in which internationalisation
requires networks which extend into target/host markets.
2.3.2 International Market Entry
The range of market entry modes is broad and encompasses varying forms of export,
acquisition, licensing and the setting up of foreign subsidiaries - with the choice of an
appropriate entry mode determining the control, required resources and risk involved in foreign
expansion (Laufs & Schwens, 2014).
To date, the vast majority of literature on the topic of foreign market entry choice has focused
on large multinational corporations (MNCs) (Brouthers et al., 1996). However there is a
growing body of scholarly enquiry which explores various aspects of the foreign market entry
mode decision from the perspective of entrepreneurial ventures and small and medium sized
businesses in general (e.g. Cheng, 2008; Nakos & Brouthers, 2002; Shrader et al., 2000).
Erramilli and D’Souza (1993) suggest that the nature of the entry mode decision differs for
relatively small enterprises as they typically have lower cash and resource reserves. It is for this
reason that Shrader et al. (2000) ask how “firms already experiencing the risks of relatively
small size and newness also successfully manage the additional strategic risks of entering
foreign markets so early in their existence?” (pp.1227-1228). They must either select low
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16BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
involvement entry modes (such as licensing and exporting) initially or alternatively rely on
innovative business models and investment structures (Nakos & Brouthers, 2002).
Cheng and Yu (2008) note SMEs’ and entrepreneurial ventures’ heightened sensitivity to
external influences as placing additional pressure on their decision-making in this respect. While
Lu and Beamish (2001) indicate that entry mode decisions have a significant impact on SME
performance and longevity. This makes the choice of an appropriate market entry mode
particularly important.
A diverse range of theoretical frameworks are employed by various authors to contextualise this
decision process for the SME and include network theory and resource-based views among
others (Laufs & Schwens, 2014). Brouthers et al. (1996) favour Dunnings Eclectic (OLI) theory
as a paradigm in which to consider the internationalisation of SMEs. OLI posits that firms take a
wide set of internal and external considerations into account with regard to the net total risk and
return posed and compare market entry mode options accordingly (Nakos & Brouthers, 2002).
Laufs and Schwens (2014) also cite OLI as a dominant theory. They attribute this to the fact that
the OLI model assumes a more comprehensive set of firm considerations (including ownership
structure, location and internationalisation). In addition, Nakos and Brouthers (2002) find that
the OLI framework is suited to SME internationalisation studies and claim that it is the only
theory in the field that is capable of providing descriptive and predictive value.
Brouthers et al. (1996) suggest that, when viewed through the lens of OLI theory, the
considerations faced by SMEs are not dissimilar to those MNCs must take into account when
making entry mode decisions. Shrader et al. (2000) however hypothesise that smaller firms with
no prior foreign experience must trade various individual risks off against each other to
essentially reduce exposure to the total risks associated with internationalisation. Their empirical
findings show that such tradeoffs are frequently employed to mitigate risk, with factors
including foreign commitment type (foreign entry mode) (Shrader et al., 2000).
While some theorists consider host markets as homogeneous and treat them equally, others
explore the implications of real world differences between market environments (Laufs &
Schwens, 2014). By way of example, Lévesque and Shepherd (2004) address the impact of the
economic development state of host markets (in particular, the difference between emerging and
developed markets) on the choice of entry strategy adopted by entrepreneurs. Their model
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17BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
implies that it is more beneficial to mimic a competitor’s entry strategy when entering an
emerging economy than it is when entering a developed equivalent (Lévesque & Shepherd,
2004).
Irrespective of market, the entry decision may often need to be made more than once with
regard to a particular market as firms often reenter certain markets. In addition, the nature of a
firm’s involvement in a particular market may change over time as the organisation continues to
learn, grow and internationalise further (Johanson & Vahlne, 1977).
2.3.3 Internationalisation Stages
In terms of process, two closely related scholarly approaches dominate internationalisation
literature – what Andersen (1993) labels the “innovation-related models” and the Uppsala model
(Madsen & Servais, 1997). In both cases, the typical internationalisation process is described as
occurring in a slow and phased manner (Khojastehpour & Johns, 2014).
The Uppsala model was originally proposed by Johanson and Vahlne (1977) and unfolds in a
series of four related and sequential stages, starting with exporting and ending with overseas
production (the latter made possible by foreign direct investment). In addition, pre-defined
change mechanisms are predicted to occur between each stage, as knowledge and experience are
acquired and firms’ capacities to overcome psychic and geographic distance are improved
(Johanson & Vahlne, 1977). Innovation models, on the other hand, consider the
internationalisation process as a series of innovative actions, which require the adaptation of the
business at each phase of the process (Madsen & Servais, 1997). Like the Uppsala model, they
assume the global expansion of the internationalising firm to be incremental and gradual –
typically due to initial lack of knowledge, risk aversion or other related factors (Madsen &
Servais, 1997).
Additionally, there have been attempts to build more contemporary general stage-based process
theories based on different variables (such as the network model of internationalisation proposed
by Johanson and Mattsson (1988) and discussed briefly above. Along with these other
traditional approaches however, the Innovation and Uppsala models in particular have come
under scrutiny in recent years, as authors question their validity in rapidly globalising and less
predictable market environments (Knight et al., 2004). Andersen (1993), for example, argues
that the Uppsala model relies on generalisations that do not fit a broad variety of contemporary
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18BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
cases. As Oviatt and McDougall (1997) point out, in the period since the development of these
models, markets have changed - becoming more integrated, offering cheaper communication
and transport and digital knowledge access (p.88).
It is the rising prominence and proliferation of born-global firms, however, that has posed the
most significant challenge to traditional stage-based theories of internationalisation (Knight et
al., 2004). The rapid internationalisation of these firms appears to be in stark contrast to the risk
averse and gradual process predicted by these models. As a result, Madsen and Servais (1997)
state that born-global cases are considered by many authors as being in “strong opposition” to
the traditional stage based models (p. 561). Oviatt and McDougall (1997) add that
“internationalisation process theories appear to be more undermined than undergirded by recent
research” (p.86). In recent commentary on (and revisions of) their Uppsala model, Johanson and
Vahlne (1999, 2009) attempt to explain the existence of these born-global firms in terms of their
networks (and hence access to the international penetration and associated learnings achieved by
associated firms). Oviatt and McDougall (1997) suggest instead that it is the unique resources
and entrepreneurial capabilities of international new ventures that drive rapid
internationalisation and are often necessary for survival as they seek out efficiencies in their
respective industries. Certainly, the stage-based process models fall short in accounting for
variables such as these.
One alternative model, which does take these factors into account is offered by Weerawardena,
Mort, Liesch, and Knight (2007) and was developed specifically to address the
internationalisation process of born-global firms. Their model is based on these firms’ dynamic
capabilities, which are built by entrepreneurial founders and allow for the development of
innovative products with global appeal (Weerawardena et al., 2007). Weerawardena et al.
(2007) propose that these capabilities include the development of and reliance on
complimentary networks, market-focused learning (and unlearning) and marketing skills as well
as unique and knowledge-intensive products.
Oviatt and McDougall (1997) note however that the increasing prominence of International New
Ventures is not the only challenge to existing internationalisation process theory. Evidence of
more widespread general acceleration of the internationalisation process (OECD, 1997) and
reduction in time to first-export also point to a changing global market context (Oviatt &
McDougall, 1997). As these born-global ventures proliferate, consumers will likely see further
increase in the variety and choice of products available to them (Yeniyurt, Townsend, & Talay,
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19BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
2007). O’Dwyer, Gilmore and Carson (2009) therefore argue that as competition and brand
choice continue to grow, all firms, including international new ventures, will need to innovate in
terms of the way in which their products and services are marketed to an international consumer
audience.
2.3.4 Marketing and the Internationalising Firm
In practice, international marketing is a complicated and multifaceted process that extends from
promotional activities (designed to directly increase sales) and brand-building to public image,
employee reputation and foreign shareholder perceptions (Paliwoda & Thomas, 1998).
Marketing for first-time foreign market entrants often involves building product and corporate
brand awareness from a zero-base, beginning with awareness of the brand’s existence and
developing comprehension, conviction and finally action (Paliwoda & Thomas, 1998). This can
be a time consuming and resource intensive process. Knight and Cavusgil (2004) argue however
that these commitments can be significantly reduced in the case of innovative born-global firms,
which are able to learn and adapt more quickly to foreign markets. Born-global firms may also
be more adept at utilising non-traditional digital channels (social media in particular) to drive
awareness of their products and services globally before they are available in foreign markets
(Hallbäck & Gabrielsson, 2013). To this end, Paliwoda and Thomas (1998) propose the
consideration if non-advertising communications alternatives including public relations and
activations, as traditional advertising can represent a prohibitive cost for the internationalising
firm.
The innovative approach to marketing employed by many SMEs is therefore well suited to the
requirements and constraints of marketing abroad. O’Dwyer et al. (2009) observe that SME
marketing is, in practice driven by innovation and rarely bares resemblance to textbook
approaches. Relatedly, Stokes (2000) proposes that, for SMEs, the classical four Ps do not apply
and are replaced with four I’s (as summarised by O’Dwyer et al. (2009):
• Information: Informal information gathering through authentic customer interactions
• Identification: Recognising customer needs and marketing opportunities
• Innovation: Developing and implementing fresh channel and promotional ideas
• Interaction: Bringing their product and experience to customers with personal contact
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20BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
There is therefore broad agreement in the literature that marketing in a foreign context entails
additional challenges that distinguish it from marketing practices in the domestic market and
that innovative marketing approaches are required to overcome these challenges. This is
particularly true in the case of born-globals, which are typically more constrained in terms of
resources than their multinational corporate counterparts (O’Dwyer et al., 2009). Other factors
contributing to the complexity of marketing in foreign contexts are differences in culture and
consumer values, which are discussed in more detail in the section that follows. As Yeniyurt et
al. (2007) point out, cultural distance can have a significantly negative effect on the success of
internationalising brands.
2.4 Geographic, Psychic and Cultural Distance
As discussed earlier in this literature review, international new ventures often face costs and
trade-offs that must be taken into account to determine the preferred location(s) for international
expansion (Shrader et al., 2000). Much internationalisation theory therefore, takes as an
assumption the so-called ‘liability of foreignness’ concept, which cumulatively includes
differences between the home and host markets in terms of geography, culture, politics and
economics (Zaheer, 1995).
2.4.1 Geographic Distance
Geographic distance may be the most apparent of these barriers to trade, with distance to market
and international trade volumes long characterised by an inverse relationship (Ellis, 2011). In
addition to the uncertainty involved with transacting at long distance, transport costs are also
cited as a contributing factor (Ellis, 2007). However many theorists argue that these barriers are
in decline. Indeed, this perceived reduction in physical obstructions to global exchange has been
frequently linked to the rise of international new ventures in much of the literature on the topic
(Knight & Cavusgil, 2004). Madsen and Servais (1997) state that advances in technology as
well the increase in reliability and decrease in cost of international transport and freightage have
all contributed to emergence of born-globals. In particular, Knight and Cavusgil (2004) identify
the widespread adoption of the internet and electronic communications as having reduced the
effects of geographic distance and, in turn, having made the internationalisation process more
cost effective.
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The conclusion that transport related barriers to trade have been diminishing over time has led
some commentators (e.g. Cairncross, 2001) to predict the “death of distance”. However, Ellis
(2007) believes that such claims are overstated, pointing to econometric data that suggests an
approximately commensurate decline in trade per percentage increase in trade distance (p.574).
Although the extent to which it has diminished may be debated, what is clear is that geographic
distance remains a barrier to trade (Ellis, 2007). However, the nature and extent of this barrier is
largely determined by the mode of entry employed. Import-export relationships for example
have the highest cost in this regard due to the expense of physically transporting goods from one
country to another (Wilkinson & Nguyen, 2003). As discussed below however, the effects of
psychic and cultural distances are more complex and nuanced and are harder to measure directly
(Ellis, 2007).
2.4.2 Psychic and Cultural Distance
Ellis (2007, p.576) states that “business scholars have generally measured distance in terms of
culture rather than kilometers”. Cultural distance is a term used to define the degree of
dissimilarity between cultural environments in host and target markets (Wilkinson & Nguyen,
2003). Psychic distance on the other hand refers to the total sum of factors that might prevent or
otherwise interrupt the movement of information from the firm to the market and vice versa
(Johanson & Wiedersheim-Paul, 1975). These factors can include cultural differences but also
incorporate language, the legislative environment, lifestyles, business norms and values and
institutional context (Kuivalainen et al., 2007). Sousa and Bradley (2006) explicitly address the
differences between psychic and cultural distance, noting that cultural distance talks to actual
and objectively measurable differences between cultures and is assessed at the cultural level.
Psychic distance, on the other hand, centres around perception of difference, is subjective and
should be applied with the individual as the unit of analysis (Sousa & Bradley, 2006). So while
differing values influence both psychic and cultural distance, they do so at different levels with
the former being affected by individual values and the latter by social and cultural norms (Sousa
& Bradley, 2006). Despite these differences however, the majority of authors use the terms
interchangeably (e.g. Kuivalainen et al., 2007, Ellis, 2007, Wilkinson & Nguyen, 2003). For the
purposes of this paper, they will be considered equivalent. The central challenge of psychic
distance is that, the further away a foreign culture is, the more difficult it becomes to identify
and make sense of signals from the host market, the more likely it is that misunderstandings will
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occur and the more difficult personal interactions become (Sousa & Bradley, 2006).
In addition to the transport costs associated with overcoming geographic distance then, cultural
distance requires investment in learning (Ellis, 2007). Organisations and the individuals within
them need to acquire an understanding of the cultural contexts in which they are doing business
as well as learn to adapt and accept other cultures, a skill of its own accord (Madsen & Servais,
1997). Madsen and Servais (1997) argue that, in the case of born Firms, the international
experience of the founders can go a long way towards mitigating the challenges posed by
psychic distance. As Schwartz (1992) notes, certain values lend themselves to greater openness
and acceptance of differing values and cultures. The founders of born-global companies
typically see markets as open and do not perceive national and cultural borders as
insurmountable obstacles (Madsen & Servais, 1997). Knight and Cavusgil (2004) agree, finding
that a global perspective is a defining characteristic of born-global leaders. Nevertheless,
Erramilli (1991) asserts that, all other things being equal, born-globals will still favour markets
that are more culturally similar. The corresponding concern of whether new markets will accept
these foreign products and brands is dealt with in the section, which follows.
2.4.3 Product Acceptance of Foreign Brands
Takada and Jain (1991) state the successful introduction of products developed in different
cultural and market environments can rely on a wide variety of factors, not all of which are
under the control of the firm. Of these factors, Dunning (1997) notes that cultural context
remains most critical. Onkvisit and Shaw (2009) draw on this concept to propose the idea of
“national character”, suggesting that individuals in certain countries can exhibit similar
personality traits and may respond differently to brand qualities such as ‘fun-loving’ or
‘innovative’. Yeniyurt and Townsend (2003) cite evidence that, despite popular assumption,
differences between national cultural values are stable (not declining) over time and still have a
strong bearing on consumer tastes and preferences. Matanda and Ewing (2012) concur, noting
that “a more globalised culture does not imply that consumers share the same tastes or values”
(p.6). On the one hand, cultural and psychic distance (as discussed above) can influence the
degree to which consumers identify with and develop affinity for foreign products. Typically
consumers will display greater potential appetite for brands which are positioned in a way that
reflect similar cultural values (Craig, Greene, & Douglas, 2005). In addition however, Yeniyurt
and Townsend (2003) find that certain cultural values can predispose some countries to be more
or less accepting of all foreign brands.
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By way of explanation, Hofstede, (2001) argues that social institutions are still largely based on
the cultural values that are prevalent in the surrounding society. These value systems operate at
the societal and individual level, can be differentiated by country and economy and ultimately
influence the behaviour of firms and individuals (Hofstede, 2001). In his original framework,
Hofstede (1980) proposed four cultural dimensions that included ‘individualism-collectivism’,
‘masculinity-femininity’, ‘uncertainty avoidance’ and what has been termed ‘power distance’.
Yeniyurt and Townsend (2003) build on the cultural dimensions proposed by Hofstede to assess
the relationship between cultural difference and new product acceptance, demonstrating that
certain of Hofstede’s proposed dimensions impact the acceptance of new foreign products. In
particular, they find that individualism positively effects acceptance while uncertainty avoidance
and power distance respectively increase resistance (Yeniyurt & Townsend, 2003).
Steenkamp, Hofstede and Wedel (1999) adopt a similar view of culture in informing product
adoption and diffusion but emphasise the role of consumer innovativeness in particular.
Consumer innovativeness is defined by Rogers (1983) as the speed and readiness with which
individuals within a society would typically adopt a new innovation. Supporting the connection
between consumer innovativeness and foreign product adoption is the relationship between
consumer innovativeness and independence, impulsivity, risk-taking and flexibility (and a lack
of conservatism) amongst other factors (Steenkamp et al., 1999). Yeniyurt, Townsend and Talay
(2007) agree noting that, in general, consumer innovativeness can be defined at the national
level and can be shown to impact new product acceptance. For example, individualist cultures
such as that of the United States and Northern European countries may be more open to trying
foreign brands and products than more conservative cultures that exist in Asia and South
America (Hofstede, 2001). Yeniyurt and Townsend (2003) therefore argue that brands should
adapt their approach to branding and marketing in countries where cultural barriers may exist to
acceptance of foreign brands but can adopt a standardised approach in more open societies. This
is echoed in the findings of Matanda and Ewing (2012) who conclude that balancing global
brand strategy with regional flexibility that results in superior performance.
On a more country-specific level, one further influencing factor relating to foreign brand
acceptance is country of origin associations. Onkvisit and Shaw (2009) argue that consumers
categorise countries along generalised lines, which can lead to spontaneously activated negative
or positive stereotyping. Many empirical studies have shown that consumers in foreign countries
can attach these stereotypes to products based on their origin, even when these associations do
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not apply (Onkvisit & Shaw, 2009). This can lead to unfavourable bias for brands from certain
parts of the world. For example, there are a number of studies that show that consumers in
developed countries typically view brands from other developed countries more favourably than
those from emerging economies (Lavie & Fiegenbaum, 2000).
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2.5 Conclusion
The proliferation of communications technology (the internet in particular) and faster diffusion
of knowledge are among the factors that have enabled more international new ventures to
succeed than ever before. Yet their failure rate remains high. This is due to the many additional
challenges that these firms must face, over and above those encountered by established MNCs.
These include resource restrictions and lack of internationalisation experience. Overcoming
these obstacles requires strategic thinking and an innovative approach, as BOS Brands’ success
demonstrates. The purpose of this case will be to increase students’ appreciation of the
complexities and challenges faced by international new ventures, while inspiring them to
appreciate these firms’ potential.
The rise of international entrepreneurship and the contemporary phenomenon of the born-global
firm have positively impacted the variety and choice of brands, products and services available
to consumers around the world. They have also called into question many traditional theories
and assumptions regarding internationalisation. The literature outlined in this review shines a
light on this new phenomenon of international entrepreneurship and shows some of the ways in
which born-global firms are set apart from their MNC counterparts. Theories and findings
regarding their capabilities and the factors informing their success have also been discussed
above in detail. Particularly prominent in the literature are born-globals’ innate agility, reliance
on innovation, their relational approach to network building and their employment of less
traditional marketing methods. Critical examination of the literature reveals that certain classical
internationalisation theories and frameworks (such as the Uppsala Internationalisation Model
and the four Ps of marketing) do not necessarily apply to the born-global case. The table below
elaborates on the key linkages between the literature and theory that do apply and the objectives
of this teaching case:
Table 2.1 Linkages between Literature, Teaching Objectives and Questions
TEACHING
OBJECTIVE
LITERATURE TEACHING QUESTIONS
Factors informing the
early internationalisation
of ‘born-global’ SMEs
- Knight & Cavusgil, 2004
- Karra et al., 2008
1. Why did BOS Brands want to internationalise?
2. What factors made this possible so early on?
3. What factors enable the early internationalisation
of smaller entrepreneurial firms in general?
Choice of potential target
countries and entry modes
- Nakos & Brouthers, 2002
- Oviatt & McDougall, 1997
- Laufs & Schwens, 2014
1. What informed the selection of the Netherlands /
Belgium as BOS’ first international entry targets?
2. What options were available in terms of entry
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26BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
mode, which was selected and why?
3. What might inform future target country / entry
mode decisions? (what choices would you
make?)
Born-global and SME
Marketing in foreign
cultural contexts (incl.
cultural distance)
- Hallbäck & Gabrielsson, 2013 - O’Dwyer et al., 2009
- Ellis, 2007
- Ellis, 2011
1. In what ways do BOS’ current and potential
future
international markets differ from South Africa?
2. What marketing methods and tactics are most
appropriate for BOS in these markets and why?
Differences between
internationalisation
process and challenges of
‘born-global’ SMEs and
established MNCs
- Weerawardena et al. 2007
- Knight, Madsen & Servais,
2004
1. What are the primary present and future obstacles
to
BOS’ ongoing internationalisation?
2. What current strategic options are available to
BOS?
3. If you were Dave, what would your next steps
be?
3. How would the above differ if BOS were a
MNC?
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27BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
3. Methodology This research paper takes the form of a teaching case, the intention of which is to simulate a real
life business scenario in the classroom context (Ellet, 2007). Vega (2013) notes that a teaching
case should be designed with a view to sharpening the analytical and reasoning skills of
students. It should also assist in developing the students’ ability to navigate, articulate and
address business issues, which are not always immediately clear (Corey, 1996).
Yin (2003) identifies six different case study types, which include single- and multiple-case
versions each of three primary case orientations: “explorative”, “descriptive” and “explanatory”
(p. 5). These are described briefly in the table below (Yin, 2003).
Table 3.1 Case Study Type Matrix
Single-Case Study Multiple-Case Study
Explorative Assists in defining the parameters
or hypothesis for future studies
based on a single business case
Assists in defining the
parameters or hypothesis for
future studies based on two or
more similar or different
business cases
Descriptive Describes one particular business-
related scenario within and in
relation to its context
Describes two or more particular
business-related phenomenon
within and in relation to its
context
Explanatory Presents new information
regarding a causal relationship
with respect to one specific set of
business circumstances
Presents new information
regarding a causal relationship
with respect to more than one set
of business circumstances
As this BOS Brands research takes the form of a teaching case, it is descriptively orientated
(Ellet, 2007). In addition, this particular case focuses on the internationalisation of a single firm,
BOS Brands, and so is a single-case study.
As discussed in the introduction to this proposal, this case narrative is designed to stimulate
insights, thought and debate around SME internationalisation and related marketing challenges.
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28BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
3.1 Case Study Content
This case has been prepared in the Harvard style. The result presents multiple overlapping
scenarios that test a broad ambit of subject knowledge (Corey, 1998). Of this style, Heath (1998,
pp. 81-92) identifies four structural components which all subsequent research will ultimately
need to inform:
1. A flowing and immersive narrative
2. An intriguing story line
3. A chronology of interrelated dilemmas and events
4. An expository structure that allows but does not guarantee the discovery of critical
information
Farhoomand (2004) outlines a typical and simple three-part case structure. The opening
introduces the context and protagonist and answers the core questions of what, who, why, when
and where; while the body tells the broader story, introduces dilemmas and alternatives and
builds tension (Farhoomand, 2004). The conclusion synthesises the case and reiterates
challenges (Farhoomand, 2004).
Corey, (1996) states that teaching cases should provide sufficient data and information for
students to support conclusions and recommendations. Ellet (2007) further suggests that a well-
written case should include “complicating properties” (p. 13) that assist in simulating the
complexity of real world business scenarios. These can include irrelevant information, unstated
facts (which can be inferred by students) and a non-linear structure (Ellet, 2007). Corey (1998)
however disagrees, noting that, while some writers believe such additional hurdles offer
pedagogical value, in that they assist the student in learning about real world complexity, the
additional time taken to sift through this information ultimately impedes learning. The final
BOS Brands teaching case includes layers of complexity and multiple overlapping narrative
components as is typical of the Harvard style (Heath, 1998) but avoid an overabundance of
attempts to intentionally divert the student’s attention from the key issues (Corey, 1998).
3.2 Case Subject Selection
The identification of a suitable case lead is dependent on a number of factors including
topicality and company cooperation (Corey, 1998). BOS Brands is well cited in the business
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29BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
press. Furthermore, as a Cape Town based venture with a relatively approachable and non-
hierarchical structure and with a top management tier that is heavily populated by MBA
graduates, BOS appeared to offer the prospect of convenience and cooperation potential. An
initial approach confirmed this, with the CEO clearly expressing his willingness to participate.
In addition, BOS Brands was selected based on its relevance in light of the teaching objectives
identified. These objectives are as follows:
1. Consider the various factors informing the decision of ‘born-global’ SMEs to
internationalise at or close to inception.
2. Understand the decision-making process of the internationalising SME in terms of
evaluating potential target countries and entry modes.
3. Grasp the complexities of marketing in a foreign cultural and business context (psychic
and physical distance).
4. Appreciate the ways in which related internationalisation challenges might be different in
the entrepreneurial (as opposed to traditional) case.
3.3 Research Design
The ultimate function of a teaching case such as this (BOS Brands) is to facilitate learning by
simulating a real-world set of interrelated business challenges as they related to a specific
scenario and/or point in time (Ellet, 2007). As a result, the research must support the case’s
descriptive function. This in turn requires field research that records a current or recent business
scenario and related set of circumstances from a variety of angles and perspectives, providing a
deep and nuanced depiction of the business situation (Heath, 1998). Gathering data from a
variety of sources within and related to the organisation has assisted in achieving this by
providing a rich platform of information. Built on this foundation, the BOS Brands is
sufficiently complex to stimulate debate and, ultimately, learning (Vega, 2013).
In terms of data gathering, Corey (1998) suggests a multi-phased approach that includes two
sets of research, beginning with an initial field visit to define key issues and identify suitable
data sources and interviewees. The second research component consists of gathering secondary
data and conducting the interviews required (Corey, 1998). The diagram below depicts the
research process proposed by Corey (1998) with primary research components highlighted in
green. This process was followed in the preparation of the written BOS Brands case.
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30BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
Teaching Case Research Process
Figure 3.1 Teaching Case Research Process (Source: Adapted from Woodside, 2010, p.35)
First Field Visit
• Define key issues• Identify interviewees and data sources
• Discuss nature of agreement and case release procedures• Identify key liaison person within the target company
Issue Definition
• Based on initial field visit, focus and articulate the key issues• Target specific action problem or problems that management must resolve
• Consider broader strategy and policy issues• Define problem scope based on availability of disseminatable information
Data Source Identification
• Identify interviewees at various organisational levels• Additional data should be considered to give a more complete picture of the current situation
(conflicting data can provide substance for healthy debate)
Administration Due Diligence
• Case release procedures should be defined and agreed upon• Confidentiatilty should be guaranteed on all information and data not included in the final case
• Time requirements and liaision agreement should be stipulated in a memorandum of agreement
Interviewing and Data Collection
• This will likely be the primary data gathering method• The appropriate approach should be determined beforehand (ie structured vs. nondirective
interviewing)
• It is important to record and observe without judging or being obtrusive
Draft Preparation
• The draft should be prepared along case study best practice lines• The writing style should be clear and to-the-point (brief sentences and clear presentation of the
core managment "action" issue up front)
• Additional research findings and data presented in the content and appendices (graphs, charts and tables) where required
Teaching Note
• Following approval of the draft by the host company, the teaching note can be prepared• This will typically include teaching objectives and suggestions and board plans as required
• This remains a living component of the case and, along with appendices, can be updated following further research
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31BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
3.4 Data Sources and Collection (Yin, 1994) identifies six sources of evidence that can be used to build a case study. These
include interviews with individuals inside and outside the business (e.g. management,
distributors, customers etc.) as well as business documentation, archival records, physical
artifacts, observation of participants and direct situational observation (Yin, 1994). As this
teaching case is descriptive in nature, data gathered was qualitative with semi-structured
interviews forming the majority of the data collection process (Ellet, 2007). However, Corey
(1998) adds that the use of multiple sources (including interviews across various components of
the ogranisation, financial data and media and press coverage) is advisable in order to provide a
robust and multi-faceted context for a well-written teaching case. These interviews were
therefore supplemented with secondary sources including factual business data (provided by the
management team) and third party opinions of the business as expressed in recent editorial
pieces sourced from reputed business titles.
It can be argued that field research (and interviews in particular) constitute a very important
component of data gathering for many teaching cases as they “bring a slice of reality into the
classroom” (Heath, 1998, p. 63). Seidman (2006) also acknowledges this function of interviews,
while noting that their value is not predictive but rather descriptive, shedding light on the
perspectives and experiences of interviewees. In the case of BOS Brands, the following key
members of the BOS Brands management team were interviewed:
1. Dave Evans (CEO)
2. Grant Rushmere (Chief Brand Officer)
3. William Battersby (National Sales Director)
4. Alison Collier (International Business Development Director)
5. Marie van Niekerk (Marketing Director)
This represents the full population of executive level marketing-related decision makers (five).
One additional written response was provided from an external source responsible, in part, for
managing the BOS brand relationship at Woolworths Foods in South Africa:
1. Marisa Munroe (Trading Head, Snacking & Gifting and Wine & Beverages)
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32BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
In keeping with the recommendation offered by Yin (1994), these interactions took place in the
form of un-structured or semi-structured in-depth interviews. Rather than relying on formal
questionnaires to direct the interview process, conversation-guides were used to ensure that key
themes were covered without unduly interrupting or influencing the content unearthed during
the interview (Corey, 1998).
3.5 Data Analysis
Once data was collected from the three source types identified above, the findings were then be
synthesised and analysed to provide the basis for the case narrative (Yin, 1994). Woodside
(2010) suggests utilising the resulting diversity of data to triangulate information and increase
the level of both accuracy and complexity of the resulting case.
Data Analysis Triangulation
Figure 3.2 Data Analysis Triangulation (Source: adapted from
Woodside, 2010, p.35)
The model that Woodside (2010) provides
depicts seven domains of case study
research data, with categories 1 to 3
including information from one of the
three separate sources respectively while
categories 4, 5, 6 and 7 include
information from two or three sources.
Seeking information in the latter domains
assisted in ensuring a more accurate and
complete understanding of the situation
being analysed (Woodside, 2010).
The accuracy of the resulting narrative and data is important in terms of replicating, to the
greatest extent possible, the conditions surrounding the actual business situation of BOS Iced
Tea’s internationalisation. However, it is important to note that certain components of both
(narrative and data) were adjusted due to their strategic sensitivity to the business at this point in
time. As the resulting product is a teaching case rather than a pure research case, this is
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33BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
acceptable (Yin, 2009). In addition, certain information was somewhat manipulated/modified in
order to ensure that learning objectives are met (Yin, 2009).
3.6 Teaching Note
Farhoomand (2004) claims that, while lessons should be implicit and unstated in the case itself,
these should be described carefully in the teaching note along with supporting information and
guides. Corey (1998) defines the teaching note as “a contribution to education” (p.8) and
stipulates that it should clarify the key issues and questions raised by the case and suggest
solutions and alternatives in light of related theory.
Lapierre and Cardinal (2003) note that the exact contents of the teaching note should be tailored
to the teaching objectives and make the case for creativity in order to meet the pedagogical
requirements of contemporary classrooms. They suggest the inclusion of notes relating to the
nature of the case and its teaching objectives, in-class discussion notes and questions and
accompanying texts, concepts and theories (Lapierre & Cardinal, 2003). Farhoomand (2004) is
similarly non-prescriptive and suggests, amongst other elements: additional readings, teaching
themes, lecture plans and a case synopsis.
In light of the nature of the BOS Brands case as outlined earlier in this proposal, the following
components are included in the teaching notes based on the recommendations made by Lapierre
and Cardinal (2003) and Farhoomand (2004):
• Teaching Case Synopsis
• Teaching objectives (as outlined in the Introduction to this proposal)
• Key questions and proposed solutions / alternatives
• In-class discussion guide
• Additional didactic elements (group assignment)
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34BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
4. Case Study
from: Rick Greene <richard.greene@ .com>
to: Dave <[email protected]>
date: Wed, November 22, 2015 at 10:13 PM
subject: Listing Opportunity
“Hi Dave - Anne and I finally had the chance to meet yesterday afternoon, crossing
paths at O’Hare for all of 45 minutes. We are excited by the prospect of getting BOS on
our shelves in time for summer 2016, and I think we could push for a nationwide rollout.
Your product is fresh, and it’s doing well in Europe, which is a good indicator for our
developed market. Simon M and his category team would need to head across to South
Africa and to your bottling partners in Europe with one of our planners, take a look at
your operations and conduct a capacity audit and - of course - we still need to run
projections. But we expect to be able to move volumes somewhere around 4 million
units in the first year, based on a 5-year exclusivity agreement (which is standard for all
our new foreign listings). Last time we spoke, you stated that you were hesitant to take
your eye off the ball in SA and Europe, but I would suggest coming across to discuss. I
think we have the market and reach to build a compelling case for BOS’ entry into the
US. I can also set up some meetings with contract bottlers and a few of our packaging
guys stateside. Let’s talk. Regards, Rick”
4.1 Introduction
Resting on the marble counter in the Slow Lounge, in the International Departures Terminal of
Johannesburg’s OR Tambo Airport, Dave’s inbox stares back at him. As always, it offers fewer
answers than questions. BOS Brand’s youthful CEO is no stranger to tough decisions, but he’s
never grown accustomed to turning down game-changers like this. He had first met with Rick
by chance, at a low-key year-end function hosted by the Swiss company that had helped develop
the flavours for BOS’ new natural energy drink. The US isn’t on BOS’ radar just yet, but this is
a major opportunity with one of the world’s most powerful retailers. It’s also in the planet’s
largest ice-tea market – consuming close to 7 billion liters1 of ice tea a year and expanding at
close to 5% a year (compound annual growth rate in value).2
1
RTD Tea in the US: http://www.euromonitor.com/rtd-tea-in-the-us/report (Euromonitor, 2015) 2
RTD Tea in the US: http://www.euromonitor.com/rtd-tea-in-the-us/report (Euromonitor, 2015)
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35BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
Since joining the founding team of South Africa’s fastest growing soft drink company in
February 2011, Dave has watched BOS’ share of its home ice tea market grow from under 1%
to close to 15%. With this growth has come renewed global interest in their unique Rooibos-
based product lines, which now include energy and sports drinks. Perhaps he would need to get
used to the fear of missing out, but he also couldn’t help wondering if now was the wrong time
to be conservative. Does it make sense to stick to the internationalisation path BOS has been
following and continue with their metered, brand-first approach? Or is it time to chart a new
more aggressive internationalization path, in light of the magnitude of the leads they were
starting to receive?
At just US$ 1 billion3, Benelux (where BOS’ internationalisation journey had begun) is a
relative drop in the ocean of global markets totaling US$ 70 billion4. Yet the networks and
relationships his team have built there alone have taken a huge amount of effort, time and
attention. With more in the pipeline in Europe, they would be stretched thin as it is. Then again,
perhaps the next market entry would be easier and quicker. They had more experience on their
side now and stronger brand recognition abroad. But would they have the knowledge and
financial backing to truly succeed? Or would BOS just get swallowed up in a market as massive
and far afield as the States. Would their trademark and irreverent guerilla marketing techniques
work in a context so different from home? As he glanced up at the departures screen, the
questions continued to flow. He would need to talk all this through with the rest of the team
soon.
4.2 Background
4.2.1 The Ice Tea Market
Dave saw massive potential in the ice tea market, which continued to steal market share from
more sugary carbonated drinks in Europe, the US and further abroad. Industry intelligence from
respected FMCG market research firm Canadean indicated that “the refreshing taste and natural,
healthy image of iced tea drinks (with naturally high antioxidant content) would continue to
drive growth and place the category in a good position to take advantage of the slowing
carbonates market”. RTD (ready to drink) tea is forecast to grow 8% per year and contribute to
3
RTD Tea in the Netherlands: http://www.euromonitor.com/rtd-tea-in-the-netherlands/report (Euromonitor, 2015) 4
Source: http://www.bdlive.co.za/business/retail/2013/09/23/bos-plans-to-take-its-ice-tea-to-rest-of-africa (Business Day live, 2013)
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36BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
20% of global growth in the soft drink market in the five years to 20185 and statistics cited in
the most recent forecasts cited by BOS’ marketing director, Marié, point in the same direction:
• Ice Tea represents close to 9% of the global soft drinks market by value and volume and
is one of the fastest growing categories.
• Ice tea has grown twice as fast as the market over the past five years and is expected to
grow by 45% over the next five years
• RTD tea’s fast growth is driven by a strong and long-lasting consumer trend towards
healthier options that also offer great taste.
4.2.2 The BOS Team
Dave first encountered BOS as a customer, stocking the 275ml cans across his chain of artisanal
bakeries. Shortly after being introduced to other founders, however, he decided to invest in the
business directly, coming on board as CEO in 2011. His interest was fuelled in part by the
market opportunity and by his belief in the product and brand. But he had also formed a strong
bond with BOS’ people. Grant Rushmere, Richard Bowsher and Dave worked together closely
from very early on. As Chief Brand Officer, Grant led the development of BOS’ all-important
brand and was, in many ways, the visionary behind BOS’ unique positioning. Grant was
outgoing, and adventurous and was a well know personality around Cape Town and beyond.
Richard was a successful Silicon Valley entrepreneur who brought a wealth of entrepreneurial
experience (and access to his organic rooibos farm) to the table. They were joined by BOS’
energised Marketing Director, Marié van Niekerk, who has subsequently launched the brand in
Western Europe with great success and just one permanent staff member. Marie was well-
connected in the art, design, music and natural sports circles and shared Grant’s deep passion
and understanding for the BOS brand. The team was subsequently joined by Allison Collier,
BOS’ to-the-point International Business Development Director, who is also an active decision-
maker in the brand’s internationalization endeavours. Back home, William Battersby, the
pragmatic Managing Director of BOS’ Southern African operations, keeps the brand on its
growth trajectory and mirrors Dave’s sharp business acumen and appreciation for out-the-box
thinking.
5
Source: http://canadeanreportstore.industryreportstore.com/soft-drinks/iced-rtd-tea-drinks/global-iced-rtd-tea-drinks-report-2013.html
(Canadean, 2013)
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37BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
Although they spent much of their time apart and travelling – together the team were a force to
be reckoned with. Their ability to build strong relationships and networks in South Africa and
further afield was a major contributing factor to BOS’ success. The Head of Trading for the
Beverages Category at Woolworths (an upmarket South African retail brand) recently recalled a
casual conversation that the BOS team had struck up with a Woolworths Director at Cape
Town’s Design Indaba6 four short years ago. This friendly chat ultimately led to BOS’ listing in
most of the prestigious retailer’s 149 stores. Dave knew that any successful evolution of BOS’s
internationalization strategy would require the strategic input of these key team members as well
as BOS’ investors, which included Sir Alex Ferguson and South African venture capital firm,
Invenfin7.
Figure 4.1 BOS' Founding Team includes Dave Evans, Grant Rushmere, Richard Bowsher, Marié van Niekerk
4.3 The BOS Brand
4.3.1 Positioning: Healthy and Fun
6
Design Indaba is an annual global design conference that takes place in Cape Town in February. In 2011, BOS was a finalist for the coveted
MBOISA (Most Beautiful Object In South Africa) Award. 7
BOS’ is privately and closely held company with majority shareholder, South African early stage venture capital firm holding the largest
number of shares. Dave, Richard, Marie, Alison, William and Grant also hold significant stock. The balance is held by trusts and private individuals including Sir Alex Ferguson, former Manchester United manager.
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38BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
BOS’ tight-knit team and entrepreneurial spirit are evident in the brand’s personable and
pioneering approach, the way its products are packaged and marketed and the brand as a whole.
Dave sits back for a moment to consider the brand’s essence - an unexpected combination of
health and fun. The brand and product had been born out of two basic insights. Firstly, the
health food and organic products markets in 2010 were niche, somber and generally took
themselves too seriously. As Grant put it, they were characterised by the “Birkenstock
brigade”8. Secondly, the shallow commercialism that typified the mass market consumer of the
1990s and 2000’s was giving way to a deeper level of sophistication and appreciation for
intrinsics.
BOS’ vision from the beginning was to bring consumers a healthier beverage alternative that is
also lighthearted and suitable for the mass market. The organic Rooibos9 is farmed exclusively
at Klipopmekaar (Richard’s farm in the picturesque Cederberg) and is high in natural anti-
oxidants. The formulations are lower in sugar than other competing products such as ice teas
and soft drinks. BOS’ growing product line is also made with all natural fruit flavours and is
preservative and colourant free. Although, instead of appealing to its natural credentials, they
intentionally hide them on the back of the can (and on the brand’s website and social media
presence). So while they are easy for customers to discover, BOS’ packaging remains clean,
iconic and fun. It also gives the brand a casual feel. Grant always likened the brand to the kind
of person who cares about integrity, health and the environment but doesn’t announce it to
everyone she meets. BOS is more laid back, and so the brand’s marketing focuses on the brand’s
fun factor and tongue-in-cheek humour instead.
Figure 4.2 BOS' Current Ice Tea Range in Standard 275ml Tall Format Cans
8
“Birkenstock is a German brand of cork and leather orthopedic sandal, popularly perceived as the quintessential footwear choice of more
ardent and devout natural- or eco- consumers. 9
Rooibos tea is made from the fynbos plant of the same name, which is endemic to a small mountainous region of the Western Cape province.
It is very rich in anti-oxidants, electrolytes, anti-inflammatory properties, and essential minerals and contains no caffeine or preservative.
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39BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
The result is an approachable brand with good looks and plenty of soul. Multifaceted, it offers
many different attributes for consumers to engage with as they get to know the brand and
product. Grant’s opening to the company’s original investment deck touched on just a few of
these. In it, he states: “BOS offers a compelling and interesting proposition of style, celebrated
premium design, great taste and health. Each of these factors are underpinned by compelling
product intrinsics (organic Rooibos, no caffeine, no colourants, no preservatives, low in
sugar10). All packed together in an authentic and lighthearted brand that is fun to engage with –
global but with African roots.”
4.3.2 A Brand-Led Business
A brief announcement comes over the lounge PA system: the scheduled 11.59pm KLM
departure has been pushed out by 30 minutes due to a delay in the incoming flight. Just an hour
behind Johannesburg, Amsterdam was experiencing winter snow storms - a far cry from the
Johannesburg heatwave. Dave orders a vodka-BOS (they’ve recently started supplying the
Lounges in Johannesburg and Cape Town) and settles into an armchair with a view of the
departures status screen and the tarmac beyond. He reads over the budget slide for his
presentation at their upcoming Klipopmekaar strategy retreat in December. Perhaps
unsurprisingly, the very first bullet point covers brand-building spend in their new markets:
• Explore cost-effective ways to build brand equity in new European markets –
Additional 1.2 million Euro plan to ensure that BOS’ attributes are properly established
and understood among primary audiences in France and Spain in the next three years.
Dave knows the most effective brands are based on a combination of share-of-shelf and share-
of-mind (the power to influence consumer perceptions on the ground). Regarding the former,
Alison and her team have invested heavily in BOS’ distribution partnerships and channels,
carefully monitoring, supporting and working with distributors who understand the brand and
market and work with the right retailers.
As BOS achieves a foothold in critical distribution and retail channels, there is work to be done
to ensure the gains made in brand awareness and perception keep pace. This is especially
10
BOS lemon ice tea contains 6.8g of carbohydrates (predominantly sugar) per 100ml compared to Lipton’s 8.2g and Arizona’s 9g. Coca Cola
contains 10.6g (source: BOS Brand Introduction, BOS, 2013)
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40BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
important in developed markets such as Europe, where there can be upwards of 60 RTD tea
brands to contend with. For BOS, their commitment to building a brand-oriented business plays
out in some critical decisions, financial and otherwise. For one thing, this means investing time
and money to ensure that first encounters with the brand take place in the right contexts. The
brand’s three marketing platforms are natural sports (like surfing and cycling)11, art and design,
and niche music experiences.
It has also meant a commitment to always launch the brand into the HORECA (hotel, restaurant
and café) trade well in advance of hitting supermarket shelves. By utilising carefully selected
outlets to reach the right crowd first, BOS builds positive associations with the brand in a high-
touch and brand-appropriate setting. These environments allow BOS to be introduced to
consumers in a personable and knowledgeable way rather than anonymously with just a price
tag to do the talking. Marié is certainly right when she says “BOS’ brand personality is its
strongest asset”, but it is challenging to convey BOS’ multi-faceted brand to somebody
encountering the product for the first time on the shelf of a local supermarket.
4.4 Internationalisation
4.4.1 Born to be Global
The fact that BOS, a South African FMCG startup, is present in five European countries and
already moving significant volumes abroad has little to do with luck. BOS’ business model and
brand were designed for internationalisation. This puts BOS in a growing club of “Born Global”
firms – businesses that are created with the intention of internationalising within three years of
commencing operations. In BOS’ case, this was based on the conflation of three factors:
• Firstly, the premium soft drink market in South Africa is limited and, although ice tea’s
share is increasing, current consumption remains at around 1L per person per year12
(compared to an average of 6L in Europe and 18L in the USA)13. South Africa could not
provide the scale required to meet BOS’ revenue target of US$ 100 million by 2020.
11
Natural sports (or “free” sports) are defined by the BOS team as outdoors, high energy sports which are generally free to participate in and
involve a high degree of interaction with natural elements 12
RTD Tea in South Africa: http://www.euromonitor.com/rtd-tea-in-south-africa/report (Euromonitor, 2015) 13
RTD Tea in the US: http://www.euromonitor.com/rtd-tea-in-the-us/report (Euromonitor, 2015)
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41BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
• Secondly, the personalities and experience of BOS’ founders and their broader team as
well as their ambitious mindsets and global exposure (cumulatively working in Africa,
Asia, Europe, North and South America and Australia) resulted in hunger for global
success and the network and knowledge to recognise and develop opportunities abroad.
• Finally, not to be discounted, the appeal of their Rooibos-based product and fun, healthy
brand is aligned with global trends and tested positively with consumers in key markets.
4.4.2 Target Region/Country
One key question for the BOS team was where they should begin, in terms of target region. On
the cards initially was expansion northwards into the rest of Africa (ROA) as well as options
further afield in the USA, Europe, Japan or China – all selected on the basis of the volume and
margin opportunities these regions could offer. Although the ROA is broadly characterised by
fast-growing economies and a burgeoning consumer class, the team had decided against this, as
the ice tea market (and related product knowledge) there remains limited and cultural and legal
barriers can make business difficult in many countries.
Similarly, the ice tea consumption is relatively low in China and the team’s decision in that
market was to wait for larger players to invest the billions required to establish the category
there first before introducing the BOS brand. Other markets were not deemed appropriate for the
brand’s early stage expansion, due to the significant cultural and language barriers and the
team’s lack of networks and relationships in that part of the world. As a result, Western Europe
and the USA became the two primary contenders for initial internationalisation.
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42BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
Figure 4.3 BOS' Global Presence - 2015
Western Europe was eventually selected for four reasons:
1. It was possible to launch the brand in smaller countries first and so contain the risk of
both failure and success; it was easier to tackle Europe on a piecemeal basis as the
region’s markets are more compartmentalised.
2. The cultural and language similarity between the Netherlands and Belgium, in particular,
provided fertile ground to begin the internationalisation process in an environment with
low communications and cultural barriers and growth opportunities.
3. The team was more connected in Europe than they were in the USA, based on BOS’
existing network of partners including suppliers (including packaging and natural
flavourings), investors and other business contacts.
4. It would be easier to do business with Europe due to proximity, making supply chain
extensions and travel less complicated (many cities in Europe are accessible via direct
flight from Cape Town or Johannesburg).
4.4.3 Entry Mode
Another critical decision for Dave’s team had to do with entry mode. Once tea syrups have been
formulated and shipped, the manufacturing process typical of soft drinks like iced tea (just add
water) is relatively straightforward. The result is a high degree of operational flexibility
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43BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
regarding supply chain and business models. BOS faced (and still faces) a variety of entry mode
options as it enters new markets as long as the formula is protected, quality standards are
maintained and the brand is built in a consistent way. They can export the packaged product (at
least to begin with) and sell it through distributors abroad. This option offers the least risk and
highest flexibility but the lowest degree of control concerning their all-important brand.
Alternatively, it was possible to raise more capital and set up foreign subsidiaries in each
country/region. Investing in their own distribution and marketing infrastructure and teams would
have given the business more control, but at a significant cost and a higher level of risk. Once
the brand was entrenched and demand was established, they could even licence their formula
and brand to third party manufacturers and marketers.
In the end, BOS opted to internationalise by employing a hybrid entry mode approach,
manufacturing different packaging formats in various locations (wherever this proved most
profitable) and selling the product to wholly owned subsidiaries and distribution joint ventures
in different countries and territories. These entities handle their own P&Ls and oversee the
distribution and marketing to a varying extent depending on BOS role in each case.
4.5 BOS in Europe
4.5.1 Internationalisation Stages and Timeline
Figure 4.4 BOS' Internationalisation in Europe 2010 – 2016
Having made their initial strategic decisions in respect of the target region and entry mode, it
was time for action. BOS launched into Europe in 2013 and is now present in six countries on
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44BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
the continent. Dave considers the timeline to date. After South Africa and neighbouring
countries, the internationalisation journey began with the establishment of the brand in
HORECA trade in Belgium and shortly after that, in the Netherlands. As BOS became better
known and recognised in these two launch markets, demand in nearby countries began to grow.
Based on the new hybrid distributor-partnership model that was developing, BOS was then
launched into key cities in Sweden and Switzerland. After about 18 months, distribution in the
Netherlands and Belgium was opened up to include retail outlets. In the Netherlands, this point
came by invitation from Albert Heijn (AH)14 – one of the Netherlands’ largest supermarket
chains with 878 stores located across the country. Due to high levels of awareness and demand
from the public as a result of Marié’s grass-routes marketing efforts in the Dutch art, design and
music scenes, the BOS team felt the brand was known and understood enough to launch into
AH.
Looking at the timeline, it was apparent to Dave that BOS’ internationalisation was gaining
momentum – an exciting but daunting prospect. Even though their recipe for foreign market
entry was becoming increasingly efficient, they faced new challenges in Spain and France. For
one thing, the sheer size of both required a more compartmentalised approach and a nuanced
understanding of the various city profiles and cultures (with their limited staff on the ground,
they had to rely heavily on their distribution partners). As he took his last sip of BOS, he
wondered if it was time to evolve their distribution and marketing model or if their current
structure and hands-on brand-centric approach could withstand the acceleration.
4.5.2 Competitive Environment
14
Like Woolworths in South Africa, Albert Heijn is a full service (not discount) supermarket that offers a premium customer experience and
higher quality products. AH’s market share in the Netherlands is currently 30%).
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45BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
In particular, Dave thought of the
complexities of the competitive
environments they faced in Europe.
There were two major incumbents in
the ice tea market there, Lipton and
Nestea. There was also a number of
other more niche, local competitors
to contend with, such as Estathé in
Italy and Pfanner in Austria. And of
course, there were all the indirect
competitors: soft drinks, energy
drinks, sports drinks and mineral
waters. On a simple grid, Marié had
mapped BOS’ core positioning
relative to well-established
competing offerings in the EU in terms of its two core attributes: natural and fun. BOS occupied
a definite gap in the market and, to compete effectively, they needed to protect this space. Grant
had summed it up best: “BOS hits the sweet spot, filling the gap in the beverage market,
offering consumers a strong emotional brand and a natural, healthy product”. Not only do
consumers face a vast array of ice tea and natural soft options in these markets, but competitors
are better established and more aggressive than they are in South Africa. Specifically, Lipton
(owned by Unilever) and Nestea, are both very active. As BOS works to build their brand, they
continue to encounter fierce and often direct competitive responses.
Entering their home markets (Nestle is headquartered in Vevey, Switzerland) was especially
daunting. In fact, this was another key reason Alison had favoured the HORECA-first approach,
“flying under the radar” initially while building awareness and demand. Not one to shy away
from a challenge, Dave had wanted to take the bigger market players on more directly (and
potentially benefit from the David and Goliath PR play-off) but Alison’s caution was well
advised. Thus far, with support from their distribution partners and legal partners, BOS had
managed to weather the backlash but Dave was well aware that there would be more to come.
Figure 4.5 BOS Competitive Positioning Matrix (source: BOS, 2013)
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46BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
Already he had heard that Lipton was developing an ice Rooibos for the South African market15,
and he had a feeling this was just a trial market for a more ambitious roll-out.
4.5.3 Distribution and Sales
In this environment, the only way to win in the growing ice tea market is to keep a level head
and stay focused on the things that matter most – obvious as they often are. For Dave that meant
balancing time and money spent on driving availability (more push) and awareness (more pull).
Marié and her team worked hard within tight budgets to seed the product within the right circles
and win over the hearts and minds of the target audiences. The other component of the mix was
ensuring the right distribution and sales channels were being accessed and utilised. In addition
to focusing on HORECA trade first (a rule that Alison had applied across the board to date)
picking the right partners had proved crucial to BOS’ success in Europe to date.
In BOS’ home market, the team had actively sought to connect directly, first with HORECA
outlets and later with major supermarket chains such as Woolworths. Although third parties
often handled logistics, retail relationships themselves were driven and managed by Will, Alison
and the South African team. This required significant resources, but it was relatively
straightforward and had served BOS well as these retailers had supported the local start-up
largely as a result of the personal relationships they had built. The European markets
represented a more complex environment, however, as the team was less familiar with the key
retailers and individual decision makers there. Based on their lower commitment entry model,
BOS did not have the manpower on the ground in Europe to pursue and build the required
relationships from scratch, especially not in the diversified HORECA trade. As a result, they
had opted to bring distribution partners on board. Dave recalled that the best way to select the
right partners and arrive at a mutually beneficial service level agreement was not always
apparent.
As a result, since first introducing their products in the European markets, BOS had
experimented with different distribution models and relationships. The business in Belgium was
structured differently from its Dutch counterpart. (This was both as a consequence of the BOS
team’s supplier relationships and due, in part, to a strategic requirement to test different
distribution arrangements). In the case of the former, local distribution and marketing services
15
Lipton Red Tea launched in South Africa in 2012, 18 months after BOS (Unlike BOS, Lipton “Red Tea” is a rooibos flavoured product, not a
rooibos based product).
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47BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
company, Jet Import16 handles distribution and marketing with more autonomy - as a turnkey
solution to the BOS business in Belgium. In the Netherlands, the chosen distribution partner
fulfills more of a strategic logistical function with marketing headed by Marié (who Dave will
be meeting with in person after his ten-hour flight). As the two models roll out, Alison works to
optimize both with more changes made to the Belgian model (in which Marié’s Amsterdam
team began taking on a more active role in guiding and supporting marketing efforts). This was
done to reinforce the brand positioning and ensure that the right audiences were engaged. One
important point of commonality between the two approaches was the culture and degree of
brand synergy with the partner. Once again BOS applied its brand-first approach to select
partners that had the same energetic can-do approach and that all-important sense of humour.
4.6 Building an Effective Challenger Brand
4.6.1 High-Touch Networks
The display monitors above turn green – Dave’s flight will be boarding shortly. As he packs his
laptop into his leather backpack, his mobile phone rings. It’s Marié calling from Amsterdam,
where it’s the same time: 12.15 AM. The Venice Biennale has just wrapped – a six-month
international art exhibition that attracts a global A-list of hip creatives and over 300 000
members of the public, all of whom descend on Venice to immerse themselves in fine art,
theatre, music and architecture. This year, BOS was everywhere – the soft drink of choice at the
event. Marié is excited by the buzz and PR potential. Her enthusiasm is infectious, even at this
time of night. With the amount of exposure BOS has had with influencers visiting from other
large cities across Europe, she wants to put together a strategy to increase the brand’s presence
in the HORECA trade in key design cities and focus the next two months on their art and design
territory. Key contacts from BOS’ distribution partners in Spain and France were both at the
wrap-party and seemed to be onboard. She knew they would be meeting shortly but wanted
Dave to give it some thought – specifically for Paris, Barcelona and Madrid. Dave knows that
she will also want to discuss investing more in the HORECA trade in the Netherlands to support
the brand’s entry into retail through AH. The idea that customers and potential influencers may
encounter the product for the first time on a supermarket shelf has concerned Marié for some
time.
16
Jet Import is a well respected importing, distribution and marketing partner that services multiple brands in Belgium, including BOS and Red
Bull. Belgium is one of the few remaining countries in which Red Bull relies on a third party for these services.
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48BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
Like so much of BOS’ good fortune to date, featuring at the Biennale was a function of the
network of close and authentic relationships Dave and his team had built. The mere fact that
senior directors from their distribution partners in Spain and France had both joined Marié for
the final party in Venice was testament to this. Of course, BOS represented plenty of potential
revenue for them but Dave also believed that there was a degree of genuine affinity for the
business. Just as Will had noted back in Cape Town, people wanted BOS to succeed. Marisa at
Woolworths certainly concurred. It sounded un-business like in some respects but, in Dave’s
mind, that sense of good will was one of the greatest rewards that came with the past five years’
hard work. And it was the result of time and energy invested by BOS into the people around the
business – suppliers, distributors and beyond. BOS’ presence at the Biennale, alongside Grolsch
and a select number of boutique champagnes and spirits, was a case in point – a result of
Marié’s relationship building in the local art scene.
Indeed, it could be traced back to BOS’ appearance at the opening of a small store-in-store by
Moooi (a well respected commercial Dutch design collective) in South Africa two years prior.
Marié had received a call from the shop’s owner, who she had delivered samples of BOS’ new
berry flavoured ice tea when it launched in 2012. He asked her if she’d be interested in
sponsoring some BOS for the launch event and Marié didn’t hesitate. Moooi’s team took a few
cans back to the Netherlands and the rest, as they say, is history. Dave is proud of the brand’s
achievements and the inroads it has made in the design and art community and around its other
two platforms of natural sport and music. He can’t help wondering to what extent and when
BOS’ growth might necessitate them moving beyond these niche early adopter markets and into
a more mass-market space. Would BOS’ cool cache collapse if it moved too quickly into the
commercial space? Or would they be missing a critical step in their natural business evolution if
they didn’t? Perhaps more importantly, could they retain their high-touch approach to business
while accessing and appealing to millions of consumers across multiple time zones?
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49BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
4.6.2 A Fresh Approach to Marketing and Brand Building
BOS’ high-touch approach is not limited to the team’s business-to-business relations but is also
extended to everyday consumers. Aside from emphasising the HORECA trade over faceless
supermarket aisles, BOS also makes an effort to connect directly with its five target market
audiences across the business’ broader marketing and communications mix. The strategy is
different for each of the audience types, which are segmented along psychographic and age-
related lines. For example, a ‘Design Conscious Global Citizen’ might typically first encounter
BOS at design conferences, fashion shows and art exhibitions many times before cementing her
bond with the brand on social media. A younger ‘Self-Expressive Explorers’, on the other hand,
may first encounter the brand on social media and is only later be given an opportunity to
sample BOS at an outdoor music festival or similar event. No matter the market, all interactions
with BOS tend to relate to the one of its three platforms: natural sports, music and design/art.
Figure 4.6 BOS' Target Audience Segments (source: BOS, 2013)
Around these platforms the marketing mix is heavily skewed to experiences such as sampling
and activations, often connected to social media. A case in point: ‘BEV’, a BOS vending
machine that delivers an ice tea together with a public acknowledgement to anyone tweeting
#bostweet4t on site17. BOS’ cycling giraffes have also become well known for their generous
hand-outs of BOS ice tea on the street of Cape Town and, more recently, Amsterdam, Antwerp
17
View video content related to BEV and #bostweet4t: https://www.youtube.com/watch?v=mzUXa6JThVQ
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50BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
and beyond18. In addition to presence at music festivals, cycle races and other fun and healthy
events, BOS get’s plenty of exposure from stunts like these, which Marié always referred to
collectively as “marketing moments of joy”.
All of these activations, which together comprise the largest component of BOS’ overall
marketing budget, involve an element of sampling – putting cans in hands, so to speak. BOS has
also been quick to employ digital channels in fresh and innovative ways. BOS runner19 is a
Super Mario type game developed for iPhones and Google Play, which rewards outstanding
players with spot prizes such as delivery of a year’s worth of BOS ice tea. BOS’ Design-a-Can
site20 is another digital platform that has generated activity and attention by allowing creative
consumers to design their own can designs with the opportunity to see their designs rolled out
on 100 000 units. Overall, BOS has initiated in the region of 200 different marketing initiatives,
campaigns and activations in addition to ongoing public relations efforts - all within five short
years and all overseen by Marié and her small team.
Figure 4.7 BOS famous cycling giraffes on the streets of Cape Town (source: BOS, 2012)
18
View video content related to BOS’ cycling giraffes: https://www.youtube.com/watch?v=hLpIyRpP9wU 19
Download the BOS Runner game app for iPhone and Google Play: http://bosicetea.com/bosrunner/ 20
View public BOS can design submissions: http://bosdesigner.com/can-3d-8
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51BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
Marié likens marketing a Born Global firm such as BOS to gardening. Without the budget of a
big multinational such as Unilever, you can’t afford the biggest trees (the World Cup adverts)
but you plant hundreds of seedlings. As Marié has discovered, if you care for all of them, many
of them will grow and develop as the brand matures. The challenge for Marié is that it’s difficult
to say ahead of time, which of her initiatives will ultimately bear fruit. In total, BOS diversified
approach to marketing has brought with it a number of benefits:
1. Value: It achieves reach and builds awareness over time without massive “above-the-
line” spend on TV commercials and billboards.
2. Affinity: It provides an opportunity to build deeper connections with consumers and
enrich their day rather than interrupt them.
3. Depth: It promotes a multifaceted or “layered” brand experience that allows for constant
discovery of different brand elements. For example, BOS’ commitment to planting and
permanently maintaining a tree in an impoverished area for every 2000 cans they sell 21.
4. Flexibility: It allows for a responsive and agile brand-building allowing the team to take
advantage of prospects wherever they arise – many of which have burgeoned into bigger
opportunities over time (like the Venice Biennale).
Dave agrees, their current approach has brought the BOS brand significant awareness and
affinity in South Africa, the Netherlands and Belgium at cost-effective spend. But he is aware of
the downsides too – especially as BOS enters bigger and more diverse markets. One concern is
the potential lack of focus that can result. Marié and her team are finding their attention
increasingly stretched between different countries and marketing territories. Add to this a
marketing mix with too many moving parts and the result could be inefficient in the long term.
Secondly, and linked to this, Dave is not sure the current approach will scale well as BOS’
growth accelerates into the future. In addition, as the business achieves economies of scale,
Dave wonders if ATL (“above the line”) band-building approaches will become relatively more
affordable. He also wonders if, as the brand moves along the adoption curve and away from
early adopters, whether the same high-touch approach will be necessary. The team will need to
21
This contribution is only communicated in video content on the BOS website and is not included in public campaigns or on packaging:
http://www.bosicetea.com/#section-sustainability
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52BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
dig deep, creatively speaking, over the next two years to develop the brand and offering in fresh
new ways that are appropriate for a mass market while still retaining the brand’s all-important
personality.
4.6.3 An Emphasis on Creativity and Innovation
On the upside, innovation is part of BOS’ modus operandi. The team’s constant quest to keep
the brand relevant and cool in the minds of consumers involves an ongoing role for out-the-box
thinking, including not just marketing but NPD (new product development) too. In the past year
alone, the BOS team has launched a sparkling ice tea variant, a popular Rooibos and guarana
energy drink and BOS’ new 500ml BOS Sports drink format. Certainly as Alison was quick to
point out, the speed and agility at which the BOS team can move innovations through their
pipeline puts bigger players like Nestea to shame22.
In many instances, the team had to
innovate to survive or to eliminate
inefficiencies that larger corporate entities
could throw money at instead of creativity.
In other cases, innovation is fueled by the
team’s genuine enthusiasm to push
boundaries as well as respond to customers
on the ground. Because of their proximity
to the end consumer (especially in
HORECA contexts), the BOS team has a
great sense of “what will fly”. The most
recent addition to the BOS product line
was BOS Sport, a range of isotonic,
organic Rooibos-based sports drinks that
deliver an extended/sustainable energy profile 23. The range also boasts a lower glycemic index
and none of the synthetic flavourings or colourants that have come to define the rest of the
category. This innovation was born out of BOS’ interactions with sportswomen and men, born
out of the natural (or “free”) sports marketing platform and the relatively wholesome credentials
22
BOS Sport took just four months to develop from concept to final product 23
In late 2015, BOS Sport launched its own website: http://www.bossport.co.za/
Figure 4.8 BOS Sport Drinks launched in January 2014
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53BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
of their ice teas, which are proving popular with an increasingly health-conscious sporting
profile.
Dave knows that BOS’ track record of successful innovation in marketing and NPD will become
increasingly important moving forward. Crucially, it will assist in maintaining interest in the
brand and growing BOS’ share-of-shelf across categories. He also believes that innovation has a
greater role to play in allowing the business to scale. He has been reading about the four I’s of
digital marketing: Identification, Information, Interaction and Innovation and feels that this
approach could contribute to BOS’ broader marketing and business development efforts. As
Dave heads towards doors of the lift that will take him to his departure gate, he reminds Marié
that he will be joining her in Amsterdam shortly. Before he dials off, though he promises to give
some thought on the flight over to how they could build awareness in the areas around those AH
supermarkets located in areas where BOS has no lower awareness levels. For Dave, somewhere
between low-contact supermarket aisles and high-touch publicity stunts lies the answer.
4.7 Ongoing Internationalisation Challenges
4.7.1 Psychic/Cultural Distance
Another question Dave has raised before with his team is the extent to which BOS’ innovative
and creative approach will appeal across different markets and cultures. Grant had always
maintained that the brand was founded on values with inherent universal appeal and that BOS’
fun and healthy credentials resonate globally. Dave agrees, but in recent conversations with
Marié, they had also discussed the extent to which the brand may need to be adjusted for
different markets. The Netherlands and Belgium were selected as BOS’ first entry markets in
Europe, in part due to Europe’s geographic proximity. This reduced transport-related
operational costs as well as the degree of travel and communication complexity, especially
relative to Asia and the USA. Another important type of distance that Dave’s team took into
account was cultural (or “psychic”) distance. The Benelux region, in particular, offered certain
cultural and language similarities to certain parts of South Africa and there was agreement that
this would ease the business’ initial transition into international markets24. An appreciation for
lighthearted/quirky humour was certainly one example (BOS’ “designer irreverence” had been
well received to date).
24
Afrikaans, one of South Africa’s 11 official languages draws heavily on its Dutch ancestry and bears close resemblance to both Dutch and
Flemish.
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54BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
However, even there, Marié finds that the appropriateness of BOS’ three platforms differed by
cultural context. In the Netherlands, for example, there is a strong emphasis on design and art,
with most of the brand ambassadors and influencers moving in related circles. The design scene
there is very open, expressive and doesn’t take itself too seriously, which results in a
comfortable fit for the brand. In Belgium on the other hand, BOS engages with more consumers
through their music platforms; here the brand was often seeded through outdoor sporting and
music events. This was in part due to the brand’s relationship with Jet Import, but Dave felt that
there were also certain cultural nuances that set the markets apart. As BOS pushes forward into
new markets that are less culturally similar, there is certainly more work to be done to ensure
that cultural distance is taken into account and mitigated where possible. As BOS entered each
market in Europe, they learnt more about how to internationalise effectively, where to take
cultural nuance into consideration and where to stick to the way they had built the brand at
home. Much of this learning came through networks and contacts in those markets but much of
it was also based on a clear understanding of BOS consumers and influencers on the ground.
4.7.2 Country of Origin Role
Relatedly, there was the matter of BOS’ South African origin. There was agreement among the
team that “South African” or “African” should not be one of BOS’ primary attributes. Rather,
subtle African references25 hinted at BOS’ African roots. However, the brand was ultimately
created to be a “global brand with African roots”. There were many other brand attributes the
BOS team wanted consumers to recall before ‘South African’. On the other hand, however,
Rooibos’ natural benefits were increasingly recognised abroad and BOS’ Rooibos base was a
significant source of differentiation and appeal in the European markets. Grant had often noted
that Rooibos was the ultimate source of BOS authenticity. As 100% of the world’s global
Rooibos supply is grown within a 100km radius of Klipopmekaar farm in South Africa’s
picturesque Cederberg mountains, this sense of provenance was still important.
Although no formal market research on the subject had been conducted, Marié believed – based
on her interactions with customers - that the majority of European consumers did not know that
BOS came from South Africa. In fact, many brand fans were under the impression that BOS was
a local European product. Most who read the back of the pack viewed BOS’ SA heritage and
25
The bright blocked colours of the pack designs, the BOS of Rooibos (an Afrikaans word) and the lion were all selected as being emblematic
of South Africa during the initial brand design phase.
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55BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
backstory favourably, but Marié wondered if this would be the case elsewhere. The Netherlands,
Belgium, Switzerland and Sweden were relatively small countries with highly educated and
well-traveled populations. Would other consumers who were less familiar with South Africa’s
countryside, culture and national tea understand or appreciate the fact that BOS was South
African? Would they know what Rooibos is? Would it be better to tweak the brand to either
downplay or up-play these provenance components? Certainly research conducted recently
suggested that many consumers can and do form negative associations around products from
emerging market contexts like South Africa, based on assumptions about their quality and
safety. In addition, some countries were more patriotic in the purchasing habits and were
naturally less likely to buy foreign products. When he studied and worked abroad as a
Management Consultant Dave had observed that consumers are not equally adventurous and
open-minded the world over. The extent to which other countries in Europe and further afield
would appreciate BOS’ African roots or its quirky and colourful South African sense of humour
remains to be seen.
4.7.3 Legislative and Legal Hurdles
Another set of complications, although anticipated, were legislative. Not only did BOS have to
comply with onerous EU product and packaging standards but they also had to change their
label design for these markets. Furthermore, listing in AH had been a coup and had not gone
unnoticed by Nestle and Unilever. Within six months (and based on some energetic lobbying
behind the scenes, Dave suspected), Brussels passed new legislation that forced BOS to change
its product name too. These new regulations specified that only products made with Ceylon
based tea leaves (Camellia Sinensis) could be called ice tea. Initially, the team had been
flummoxed. In true BOS-style, a workshop was called over Skype one Sunday afternoon, and
the matter was resolved within four minutes – a record even for BOS.
Marié had long felt that Rooibos’ credentials should be up-weighted on BOS’ packaging
without sacrificing its iconic simplicity. She had been tracking Google searches and entries
around the Rooibos name globally and had watched their key ingredient and differentiator rise
to fame over the past three years based on anti-oxidant and anti-inflammatory properties.
Henceforth it would be BOS Ice Rooibos. The team approved the change unanimously.
Nevertheless, running different naming conventions and label formats is creating complications.
Phrases for SEO (search engine optimisation) now need to be built around two different product
names and global social media profiles must alternate between the ‘tea’ and ‘Rooibos’.
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56BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
Operationally, there was also now a risk of running too many products labeled for one market
and not enough for another, which could lead to stock management headaches down the line. It
is seldom that a month goes by without a legal letter arriving that requires some form of
expensive response26 – Dave recognises that this is largely a tactic to wear the BOS team down
but the expense (financial and in terms of focus and effort) is very real.
4.8 Conclusion
4.8.1 Opportunities Near and Far
The BOS team and investors are truly fortunate, the business’ and brand’s growth have far
exceeded expectations. Their challenge today - to choose between so many good opportunities -
is a great challenge to have. As a Johannesburg thunderstorm moves in outside, he runs through
the options one last time. They could stick in the Western European countries (where BOS has
been present for a few years) and put all the team’s efforts into becoming the third biggest ice
tea brand there. Alternatively, they could expand more aggressively into the rest of Europe and
invest greater energy into growing the brand in France and Spain. They could seek additional
investment and take advantage of the US opportunity that appeared to be developing. Or they
could invest this same capital into accelerating their internationalisation in Europe – perhaps in
Germany first and the United Kingdom – a popular exit point for Canada and the USA. They
could even leverage their brand exposure and distribution relationships to build the brand
elsewhere on the African continent. Each of these options came with a unique set of potential
upsides and downsides. Dave knows that, if the team chooses to go ahead with a US deal, they
will encounter many of the challenges they had experienced when entering Western Europe
(cultural distance and myriad legal and competitive hurdles among them). They will need to
weigh the risks up against the rewards and decide just how thinly they could spread themselves
to grow at the maximum possible pace, while still protecting the many facets of their business
and brand that have worked so well to date. Dave and his team seem to have many decisions to
make and, as is often the case these days, so little time to make them.
He settles into his seat bound for Amsterdam, with some time to think through the more
immediate challenges around bolstering brand awareness for BOS in the Netherlands. He finds
himself agreeing with Marié; no consumer should encounter their brand for the first time in the
26
Most legal issues that are raised involve trademark and other intellectual property matters or marketing claims.
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57BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
aisle of a supermarket. In the Netherlands, a country of under 17 million people, this challenge
was far from insurmountable, especially given the traction Marié and her very limited team had
already managed to achieve there. Ultimately, however, this is a small component of a bigger set
of questions, which BOS needs to answer (and ultimately innovate around) to continue growing
the business. How will BOS best scale its high-touch and personable brand for the world’s mega
ice tea markets? What are the key strategies they will need to put in place to ensure that they
leverage and remain true to the brand? And how can they achieve this within an efficient
timeframe to ensure that they don’t miss out on too many opportunities along the way? To that
end, before he switches his phone to flight mode, Dave takes a few minutes to send a reply to
Rick’s invitation. He’s not certain it’s the right call to make but then, as with many junctures
along BOS’ internationalisation journey, he realises that more time spent thinking probably
won’t bring greater clarity than he already has.
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58BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
4.9 Discussion Questions and Assignment
4.9.1 Questions for General Discussion (for preparation before session 1)
1. Discuss BOS’ internationalisation strategy. How effective have the team’s decisions and
actions been in terms of the various components of BOS’ internationalisation to date?
2. In what way does BOS’ internationalisation process and the options available to the BOS
team differ from those that a large multinational corporation might face, based on your
experience/knowledge?
3. What are the options currently available to the BOS team in their ongoing internationalisation
and what are some of the advantages and disadvantages associated with each?
4. If you were Dave, what would your next steps be and why?
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59BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
4.9.2 Group Assignment (for preparation before session 2)
Your team constitutes a niche and very well-respected consulting firm that advises Born Global
businesses on their internationalisation strategies and programmes. Dave is a good personal
friend of yours and you are keen to get more involved in BOS’ business as you see considerable
potential. Your firm assists in providing direction and formalising strategies across various
functions within client businesses (Born Global strategies often develop organically and are
highly emergent). In particular, you specialise in advising brand-centric businesses on creating
brand equity by growing the business and brand together. Based on your team response to
question 4 above, you have been asked to put together a brief, no-nonsense presentation to
Dave, Marie and Alison outlining and justifying your recommendations regarding BOS’ further
internationalisation. Dave’s request has come in the form of a brief (as always) email:
________________________________________
from: Dave <[email protected]>
to: You <[email protected]>
date: Thurs, November 23, 2015 at 9.12 AM
subject: Your valued input
“Hi guys,
As per our earlier conversation (I outlined our current situation and the opportunity in the US),
I’d like to relook at our internationalisation strategy. Before proceeding with detailed analysis
though, I’d really appreciate your initial thoughts on the subject and a rough skeleton of a three-
year internationalisation plan, to help guide our decision-making moving forward.
As discussed, I’ve set aside a very brief 10-minute slot with 5 minutes thereafter for Q&A,
which we will cram into our strategy retreat at Klipopmekaar in December. I know it’s tight but,
based on that, I think we’ll get a good idea of whether to pursue this further. Please keep the
deck to 10 slides or under, but ensure the thinking behind it is rock-solid and that you guys
have considered all the angles and options. It shouldn’t take longer than 4-5 hours to prep.
Looking forward to it and thanks again.
Dave.”
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60BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
4.10 Case Exhibits
4.10.1 Exhibit 1. The Global Ice Tea Market (source: Bos, 2015)
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61BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
4.10.2 Exhibit 2. Ice Tea Market and Competitors – South Africa (source: Bos, 2015)
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62BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
4.10.3 Exhibit 3. Marketing and Activations 2015 – Netherlands (source: Bos, 2015)
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63BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
4.10.4 Exhibit 4. On-Premise / HORECA Merchandising Examples (source: Bos, 2013)
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64BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
4.10.5 Exhibit 5. Sales Contribution and Growth by Region (source: Bos, 2015)
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65BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
5. Teaching Note
Available for Lecturers only.
6. Conclusion
The BOS Brands teaching case centres around the ongoing internationalisation strategy and
experience of a South African FMCG venture in the early years of realising its global expansion
ambitions. The case builds on the key issues faced by young CEO Dave Evans as he attempts to
evaluate a new opportunity to list with a large US retailer and closely follows his consideration
of the options at hand. Key amongst these is weighing up faster brand and revenue growth
against the more metered and brand-oriented approach that the BOS team has adopted to date.
The case was specifically developed to achieve a dual purpose, as outlined in the introduction to
this paper. The primary purpose, as noted, is “to provide students with a practical understanding
and appreciation of international entrepreneurship and the complexities of the
internationalisation process and related strategic choices, as they apply to a medium sized
entrepreneurial venture”. The case achieves this by exploring multiple facets of BOS’
internationalisation strategy in general and in application to the current dilemma Dave faces
with the US retailer. These are explored from a marketing, distribution and broader business
growth perspective. The case also introduces real-world complexity by including parallel
dilemmas of a similar nature. One example is the challenge Marié faces in the Netherlands as
she attempts to build brand recognition and understanding in areas where BOS can already be
found on the shelves of local Albert Heijns supermarkets.
The case’s secondary purpose is “to inspire business students to see the potential that lies within
strategically-driven emerging market ventures, especially those that have demonstrated the
vision and will to succeed in global consumer markets”. The case achieves this by putting the
student in the shoes of Dave and his young and dynamic team and bringing to life some sense of
the pace, challenges and exhilaration that constitutes the BOS team’s daily experience. BOS is a
business that, by all measures, is growing rapidly and has a bright future ahead of it. It is a
business which students would likely want to succeed (and possibly be a part of) and a brand
whose healthy and fun attributes have been built for global appeal. As such, it is living proof
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66BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
that emerging markets such as South Africa have much to offer the world (beyond raw minerals
and resources).
In addition to shedding an emerging market light on international entrepreneurship literature and
bringing together a broad range of applicable theory, this case offers students a practical
example of their application to a real world and inspiring case.
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67BOS Brands: challenges and choices faced by an internationalising medium sized South African Venture
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