International Marketing 463-441Lecture 5

Formation of Market Entry Strategies

Types of Entry StrategiesAssessment of Threats and Opportunities

Strengths and WeaknessesProduct/Market Suitability

Assessment of Resources Required to Implement

Degree of Involvement

The Extent of International Involvement

Internet

Exporter

Importer

Distributor

Direct Sales

Licensing & Franchising

Strategic Alliances

Joint Ventures

Direct Foreign Investment

Exp

ortin

g

Contractual Arrangements

Strategic Alliances

Ownership

Greater Control

AndGreater

Risk

Cateora & Graham P. 323

Strategic Option Comment

1 Product and marketing practice extension

Using the same strategies everywhere

2 Product extension marketing adaptation

While using the same products everywhere, using marketing strategies according to local market characteristics

3 Product adaptation marketing extension

While using the same marketing strategies, adapting the product offering according to market needs

4 Dual adaptation Adjusting the product and marketing strategies according to market needs

5 Product and market invention Innovating a new product and developing a new marketing strategy for it in each market

Generic Global Marketing Strategies

Keegan, W., Global Marketing Strategies, Prentice Hall, NJ, 1999

High(Global Scale)

Minimum Size of Production

Low(Local Scale)

Similar(Global Segments)

Different(Local Segments)

Customers’ Needs Around the World

Global Product Standardisation Types

Global StandardisationAircraft

MicroprocessorsBasic ChemicalsPulp and Paper

Examples: BASF, Dell, Intel

Modular standardisation and multi-brands

ElevatorsIT services

Beer

Examples: OTIS, Heineken

Process standardisationCement

Examples: Siam Cement

Local AdaptationFoods

Consulting services

Example: McDonalds, Carrefour

Structure

Retail Distribution

Manufacturer Distributor

Wholesaler

Retailers

Distribution and Sales depend on third party

Very costly to undertake own distribution if limited number of

products

Retail Market

Supplier

Local International

Own Manufacturing

i.e., Bata Shoes

Retail Outlet

Variation: McDonalds, Pizza Hut, KFC

Consumer

Good Profit Margins

Limited by Geographical Locations

ManufacturerDirect

Marketing Company

Consumer

Dealer Consumer

Low Margin/High Volume

Lack consistency in

efforts

Rely on continual motivation and

getting new dealers

Good margins/rely on regular change in

merchandise

Direct Marketing

Limited by number of dealers and customers in

network

Cost 20

Margin % 55.50

Selling Price

45

Dealers & Discounts

(SLM) 45%

(MLM)65%

65

83

Consumer Price

100

(128)

Cost 20

Margin % 58.33

Selling Price

48

A&P

25%

48

Margin

20%

64

Store Price 80

Consumer Price

100

Direct Marketing Distributor Distribution

Cost 20

Margin % 47.11

Selling Price

37.82

Freight, Tax,

Landing 12%

37.82

Margin

55%

44

Store Price

80

Consumer Price

100

• Not including VAT etc.

Export Market

Product

Benefits and Technologies in Cleaning Clothes

Problem Dirty Clothes

Hand

Washing

Automatic local

Washer/Dryer Launderette

Machine

Dry

Cleaners

Electrical Technology

SolventsWashing Powders

Fabric Conditioners

Benefit Clean Clothes

Laundry

Powders

Liquid

Detergents

Actualisation

(The Artist) Self-fulfillment

Rice

Soap Fresh

Vegetables

Most Household Cleaning Products

Water Purifiers

Fashion Clothes (e.g. Jeans)

Chewing Gum

Car Air Fresheners

Travel & Vacations Fine Fragrances

Aromatherapy products Luxury cars

Nutraceuticals & herbs

Books Fine Dining & Processed Foods

Study after retirement Fresh vegetables (Organic)

Esteem (The Executive)

Achievement, prestige,fulfillment

Social (Worker) Family, relationships,

workgroups

Safety (The Farmer) Home, Security and stability

Physiological (The Hunter) Basic Biological Needs – Food, water, air

Staples: based on survival (fear)

Necessities: based on what is good (existence)

Community: (acceptance)

Responsibility: (hope)

Fulfillment: (dreams)

Some General Differences Between European and Asian Cultures

European AsianModes of Thinking

Causal, functional Network, whole visionLinear, absolutely horizontal Nonlinear, relatively vertical

Decision Making

To suit controls Based on trustIndividual free Group solidarityTo suit the majority Reaching Consensus

Behaviour

True to principals To suit a situationBased on legal principals To suit a communityDynamic, facing conflict Harmonious, conservative

Open, Direct, Self confident Restrained, indirect without assuranceExtrovert Introvert

Purchase Patterns

Individualistic Group InfluencesOpportunistic SystematicHorizontal Vertical communication

Demographics of Odour Communication

Perfumery

Marketing

Mix

Cleanliness

Softness

Citrus

Lemon

Herbal

Green

Psychological

Association

Objective: to reinforce the belief of the consumer in the desired and projected

image of the product

Synergy with product presentation: packaging, colour, advertising, corporate image

Product

Differentiation

http://www.brandingstrategyinsider.com/all_of_derricks_posts/index.html

Fragrance Attributes

Features BenefitsSignal

Attributes

BaseCover

Impact

Odour Profile

MalodourCounteractant

Substantivity

IngredientsEg essential

oils

Tangible

Benefits

Pleasant

Fragrance

Lasting

Fragrance

Offensive

Odour

Cover

Intangible

Benefits

Romance

Well-Being

Caring

Security

Lifestyle

Association

Strength

Performance

Variant

Indicator of Use

Life Status

Freshness

Structure of Attributes for a Fragrance in a Product

Product FormulationIngredients Examples Europe Japan USA

Anionic Surfactants

Alkylbenzene sulfonates Fatty alcohol sulphanates Olefin sulphanates

5-10% 5-15% 0-20%

Non-Ionic Surfactants

Alykyl polyethenglygol ethers Nonyphenol polyethyleneglycol ethers

3-6% 0-2% 0-17%

Suds control agents

Silicones, parafins 0.1-3.5% 1-3% 0-0.6%

Foaming Boosters

Fatty acid monoethanol amides

0-2% 0-5% 0-5%

Ion exchangers Zeolit A, polyacrylic acids

5-10% 10-20% 0-45%

Alkalis Sodium carbonate 5-10% 5-20% 10-35% Bleaching Agents

Sodium perborate, Sodium percarbonate

20-25% 0-5% 0-5%

Bleach activator

Tetraacetyl ethylenediamine

0-2%

Anti disposition agents

Cellulose ethers 0,5-1.5% 0-2% 0-0.5%

Enzymes Proteases, amylases

0.3-0.8% 0-0.5% 0-0.5%

Optical Brighteners

Stilbene-disulfonic acid

0.1-0.3% 0.1-0.8% 0.05-0.25%

Anti Corrosion Agents

Sodium silicate 2-6% 5-15% 0-25%

Fragrance 0.1-0.3% 0.1-0.3% 0.1-0.3%

Where in the Supply chain are you going to enter?

Small Holder Producers

Forest, Jungle wild plant Gatherers

Producers of Animal Extracts

Chemical Feed Stock

Manufacturer

Local Collectors Research

Institutes & Universities

Plantation Producers

Government

Aroma Chemical Manufacturer

Producers of Essential Oils as By-

Products

Trader & Exporter Producer

Associations

Broker

Specialty/Aroma Chemical

Manufacturer

National FDAs

FEMA

IFRA

RIFM

IOFI

REACH

SCCP

Trader, Importer & Exporter

IFEAT

Flavour and Fragrance House

Agent

Standards Associations Flavour and Fragrance

House (subsidiary) Agent

Cosmetic & Personal Care Manufacturer

Household Product

Manufacturer

Food & Beverage

Manufacturer

Other Food & Non Foods

Manufacturer

Wholesale Networks

Retail Networks

Consumers

Essential Oil

Production

Trading

Flavour & Fragrance

Compounding

End Product

Manufacture

Wholesaler

Retailer

Consumer

1.0 1.6 2-3.0 (6-9) 2-2.5 (18-24)

Relative and (Absolute) Value Added Through Chain

1.1-1.2 (19.8-28.8)

1.2-1.4 (23.76-40.32)

The Essential Oil Value Chain (Flavour & Fragrance Industry)

Av

ail

ab

ilit

y I

nc

rea

ses

Usefulness Increases

Media Reports

Ideas

Data

Information

Knowledge

Wisdom

The Continuum from media reports to wisdom in relation to availability and usefulness

The continuum from media reports to wisdom in relation to availability and usefulness

Market Requirements of an Essential Oil

Required Oil Yield, Quality for production/market Viability

Propagation and Planting Costs

Crop Management

Harvesting & Extraction Costs

Volume and Market Acceptance

Laboratory Research

Field Research

Weather

Land Suitability

Knowledge and Skills

De-stabilising Event –

competitor, regulation, new

substitute

Market Contacts &

Network

Actual Yields and Oil Quality

Other unforseen external factors – politics, disaster,

war, regulation, etc

Assumptions & Patience

Validity based on information & Judgement

Risk Environment in Essential Oil Development

Evaluation & selection of

suitable planting materials

Knowledge of specific crop management techniques

Knowledge of harvesting, handling

& extraction techniques

Economies of scale & correct business model, Market strategy

Plant physiology & propagation

protocols

All factors effect on yield & quality

Consumers

Wholesalers & retailers

Manufacturers

Flavour & Fragrance Houses

Traders & Brokers

Primary Producer

Essential oil as primary Product. Focus on market demand & supply

and meeting standard

Essential oil as an ingredient in

a product. Focus on uses

and applications research

Manufacture of end products. Focus on

formulation and end product

development

Technical Focus

General or Niche Customers

Vertica

l Integ

ratio

n A

lon

g th

e Su

pp

ly

Ch

ain

Application Focus

Technology Focus

IP Focus (?) Specific

Customer

Branding Theme Consumer

Marketing Reaching

Mass or selected Markets

New Product Development

Agro Industrial Consumer Orientation Orientation Orientation

Consumer Trends

Important

Technical Trends

Important

Demand & Supply, Buying

Criteria Important

Venture Focus Along Different Parts of the Supply Chain

Trader

Manufacturers

Wholesalers

Retailers

Consumers

Usually bulk oils to traders who do all distribution. Lowest price and little

control over market, but wide distribution

With differentiated product some flexibility

to sell to manufacturers, costs higher but increased

margin maybe compensate.

This part of supply chain for smaller packs and end products. Can be local, national or international. Value added method like

branding in use.

Usually branded item small packs, end product. Either selective (region or retailer

type), or general distribution. High value, low

volume with added distribution costs.

Usually direct to consumers through

internet and/or direct marketing organisation. Usually specialised end products with high profit

Need high volume due to

low margin unless

specialised product

Need differentiated product. Above average returns, higher marketing

costs

Need branded specialised

product, high margins volume

depends on coverage

Business focus

towards consumer marketing away from agricultural

production

Supply Chain/Product Focus

Bi-products to Other

Supply Chains

Essential Oil Producer

High Market Growth Low Strong Weak Relative Competitive Position

Crude Essential Oil Steam Distilled

Essential Oil under

CO2 extraction

Cosmetic production for international

market

Organic Cosmetic

production for international

market

Essential Oil Based Agro-

chemical

Where the business is

currently performing

The base potential for development

The process of product/market development

The Outcomes

(potential targets)

Siz

e an

d d

epth

of

chan

ge

Tim

e

Key internal influences on the development process

Key external influences on the development process

Strengths Weaknesses Personal and enterprise competencies,

knowledge & experience that can be utilised for the benefit of the enterprise

Facilities, infrastructure, financial backing & liquidity, long timeframe view

Ability to learn through research and experimentation

Any network connections with industry and access to the supply chain for both information and marketing

Ambition and vision (but not delusional), focus & commitment

Ability to innovate technically, market and organisational wise Any factor or group of factors that can assist the enterprise gain competitive

advantage over its competitors.

Competency gap Short term timeframe, no fall back position

if positive results delayed or there are technical or market failures

Poor infrastructure that hinders production or marketing

Shortage of funds to undertake project to completion

Qualified or lack of commitment by any key people within organisation

Lack of network, knowledge and access to supply chain

Any factor or group of factors that can hinder the enterprise gain competitive

advantage over its competitors. Opportunities Threats

An identified market where enterprise resources and competencies will be able to exploit

The potential opportunity will have a large enough market size to sustain the enterprise

The enterprise will be able to take advantage of this opportunity better than any other competitors

Outside elements in the supply chain will support the enterprise

Any factor or group of factors that will allow the enterprise to grow in a

sustainable manner from the market environment.

Competitors identifying the same opportunities and enacting upon them

The regulatory environment and potential changes within it

Inability to penetrate the existing supply chain and make alternative strategies

Dependence on survival from a single or very few customers

Depending on a single product for total revenue

Adverse acts of God, bad weather, drought, etc.

Any factor or group of factors that may potentially hinder enterprise growth in a

sustainable manner without any contingencies.

Depend on Location

Potential with Right Products and Correct

Distribution and Branding

Potential with Right Products and Correct

Distribution and Branding

Limited Unless a Specific Market Exists

Potential Large Market Dispersed Worldwide

Very Limited Unless Large Domestic Market

Local Market International Market

Essential Oil

Differentiated Product

Specialty/End Product

Much Larger Market with Competition

Diversification

Local or International Market Opportunities

Market Entry Strategy Typologies

General Competitive Strategies

Type Technique

Frontal Attack Meeting competitors head on

Outflanking Locating competitors weaknesses and attacking them

Encirclement Producing more types, sizes, colours, and styles of products at similar or lower prices

Bypass Ignoring competitors present markets and technologies and doing something different

Guerilla Warfare Using local dealers and distributors to attack certain products, product lines, or channels

Timing of Entry

Pioneers Early followers

Early

Majority

Late

Majority

Late

Followers

Product LifecyclePotential Profitability

Time

Concept

Risk Taking

Competitive

Risk Taking

IP Value &

NoveltyIP Value

Prof

it

First Mover Advantage

Information

High

HighLow

Low

Early Entry Late Entry

Trade Offs between Early and Late Entry

Cost AdvantageTechnology AdvantageBehavioural AdvantagePre-emptive Advantage

Igor Ansoff

Corporate Strategy

Ansoff

Red Ocean Strategy Blue Ocean Strategy

Compete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture new demand

Make the value-cost trade-off Break the value cost trade off

Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost

Align the whole system of a firm’s activities in pursuit of differentiation and low cost

Red Ocean Verses Blue Ocean Strategy

The Six Principals of Blue Ocean Strategy

Formulation Principals

Reconstruct market boundariesFocus on the big picture, not the numbers

Reach beyond existing demandGet the strategic sequence right

Execution Principals

Overcome key organisational hurdlesBuild execution into strategy

Risk factor for each principal

Lower search riskLower planning risk

Lower scale riskLower business model risk

Risk factor for each principal

Lower organisation risksLower management risks

The Four Actions Framework • Which of the factors that the industryTakes for granted can be eliminated• Which should be reduced below the

The industries standard• Which should be raised above the

Industry’s standard• Which should be created that the

Industry has never offered

A New ValueCurve

CreateWhich factors should be created that the industry has never

offered?

ReduceWhich factors should

be reduced well below the industry’s

standard?

EliminateWhich factors that

the industry takes for granted should be

eliminated?

RaiseWhich factors should be raised well above industry’s standards?

From Head to Head Competition to Blue Ocean Strategy

Head to head Competition

Blue Ocean Strategy

Industry Focus on rivals within the industry Looks across alternative industries

Strategic Group Focuses on competitive position within the strategic group

Looks across strategic groups within industry

Buyer group Focuses on maximising the value of product and service offerings within the bounds of the industry

Redefines the industry buyers group

Scope of product or service offered

Focuses on maximising the value of product and service offerings within the bounds of the industry

Looks across complementary product and service offerings

Functional-emotional orientation

Focuses on improving price performance within the functional-emotional orientation of the industry

Rethinks the functional-emotional orientation of the industry

Time Focuses on adapting to external trends as they occur

Participates in shaping external trends over time

The Four Steps in Visualising Strategy

1. Visual Awakening

2. Visual Exploration

3. Visual Strategy Fair

4. Visual Communication

• Compare your business with your competitors by drawing your “as is” strategy canvas•See where your strategy needs to change

•Go into the filed to explore the six paths to creating blue oceans•Observe the distinctive advantages of alternative products and services•See which factors you should eliminate, create or change

•Draw your “to be” strategy canvas based on insights from field observations•Get feedback on alternative strategy canvases from customers, competitors customers and noncustomers•Use feedback to build the best “to be” future strategy

•Distribute your before and after strategic profiles on one page for easy comparison•Support only those projects and operational moves that allow your company to close the gaps to actualise the new strategy

Buyer UtilityIs there exceptional buyer

utility in your business idea?

PriceIs your price easily

accessible to the mass of buyers?

CostCan you attain your cost target to profit your strategic price?

PriceWhat are the adoption

Hurdles in actualising your business idea?

Are you addressing them up front?

Commercially Viable Blue Ocean Idea

Yes

Yes

Yes

YesNo rethink

No rethink

No rethink

No rethink

The Blue OceanStrategy Sequence

Purchase Delivery Use Supplements Maintenance Disposal

How long does it take to find the product you need?

Is the price of the purchase attractive and accessible?

Hw secure is the transaction environment?

How rapidly can you make a purchase?

How long does it take to get a product delivered?

How difficult is it to unpack and install the new product?

Do buyers have to arrange delivery themselves? If yes, how costly and difficult is this?

Does the product require training or expert assistance?

Is the product easy to store when not in use?

How effective are the product’s features and functions?

Does the product or service deliver far more power or options than required by the average consumer? Is it overcharged with bells and whistles?

Do you need other products and services to make the product work?

How costly are they?

How much time do they take?

How much pain do they cause?

Does the product require external maintenance?

How easy is it to upgrade and maintain the product?

How costly is maintenance?

Does use of the product create waste items?

How easy is it to dispose of the product?

Are there any legal or environmental issues in disposing of the product safely?

How costly is disposal?

The Buyer Experience Cycle

Guerilla Strategy

Guerilla Marketing Strategy• Levinson identifies the following principles as the foundation of guerrilla marketing:• Guerrilla Marketing is specifically geared for the small business and entrepreneur. • It should be based on human psychology instead of experience, judgment, and

guesswork. • Instead of money, the primary investments of marketing should be time, energy, and

imagination. • The primary statistic to measure your business is the amount of profits, not sales. • The marketer should also concentrate on how many new relationships are made

each month. • Create a standard of excellence with an acute focus instead of trying to diversify by

offering too many diverse products and services. • Instead of concentrating on getting new customers, aim for more referrals, more

transactions with existing customers, and larger transactions. • Forget about the competition and concentrate more on cooperating with other

businesses. • Guerrilla Marketers should always use a combination of marketing methods for a

campaign. • Use current technology as a tool to empower your marketing.

Source Levinson, Jay Conrad and Goodin, Seth. The Guerrilla Marketing Handbook. Boston: Houghton Mifflin Company, 1994

Guerilla Activity Components Evaluation

Questions Feature Evaluation

How well is the dealer or distributor known?

How good is the dealer or distributor for entry?

How powerful is the dealer or distributor in penetrating the market?

Can the dealer or distributor focus on the products and provide the necessary attention?

Can the dealer or distributor change orientation, if necessary, to accommodate unexpected changes in the market?

What level of loyalty can be expected from the dealer or distributor?

A company must work with a seasoned dealer or distributor

A company must enter a particular target market effectively

A company must penetrate the market as deeply as possible

A company needs a concentrated effort from the dealer or distributor in order to enter the market and succeed

The dealer or distributor must be flexible enough to help a company to cope with changes in the market

A company must expect loyalty from the dealer or distributor – that the dealer or distributor will not abandon the partnership

Viral Marketing

• BusinessWeek (2001) described web-based campaigns for Hotmail (1996) and The Blair Witch Project (1999) as striking examples of viral marketing, but warned of some dangers for imitation marketers.

• Burger King's The Subservient Chicken campaign was cited in Wired as a striking example of viral or word-of-mouth marketing.

• In 2000, Slate described TiVo's unpublicized gambit of giving free TiVo's to web-savvy enthusiasts to create "viral" word of mouth, pointing out that a viral campaign differs from a publicity stunt.

• Cadbury's Dairy Milk 2007 Gorilla advert was heavily popularised on YouTube and Facebook.

• With the emergence of Web 2.0, mostly all web startups like facebook.com, youtube.com, collabotrade.com, myspace.com, and digg.com have made good use of Viral Marketing by merging it with the social networking.

• The release of the 2007 album Year Zero by Nine Inch Nails involved a viral marketing campaign, including the band leaving USB drives at concerts during NIN's 2007 European Tour. This was followed up with a series of interlinked websites revealing clues and information about the dystopian future in which the album is set.

• The film Cloverfield initially released one teaser trailer that did not reveal the title--only the release date. The subsequent online viral marketing campaign for the film is remarkably complex, making use of everything from fictitious company websites to MySpace profiles for the film's main characters.

• In 2007, World Wrestling Entertainment promoted the return of Chris Jericho with a viral marketing campaign using 15-second cryptic binary code videos. The videos contained hidden messages and biblical links hinting Jericho's return and were shown interrupting WWE broadcasts.[11]

Acquisitions

Acquisition Framework

AcquisitionDrivers

AcquisitionStrategy

AcquisitionPricing

AcquisitionImplementation

External Drivers

PoliticalEconomicIndustry

Technology

Internal Drivers

StrategicManagerialFinancial

Objectives

Value CreationVertical Integration

Industry consolidation

Bidding WarsReservation Price

NegotiationShares/Cash

Organisation structureCulture

IncentivesPace

RegulationsObjectives

Excess resources

Acquisition Integration Issue Successful Acquirer Unsuccessful Acquirer

Integration Speed and Decision Making

Uses integration terms to integrate rapidly, usually within 3 months. Layoffs and other painful measures are undertaken quickly

Does not use integration terms. Merge at slow rates. Layoffs and other decisions deferred.

Communication and Vision Communicate the new vision to acquired employees immediately with a clear definition of new roles

Does not establish a new vision or new roles immediately. Minimizes communication efforts with acquired firm so not to over burden new employees.

Networking and Socialisation Uses networking and socialisation to discover new opportunities in the acquisition.

Does not over actively network or socialise with employees in the acquired firm.

Who is in charge? Keeps the acquired firm’s senior managers, but only if they agree with the vision of the acquired company post-acquisition

Keeps all the acquired firm’s senior managers through a variety of fiscal and non-fiscal incentives

Integration Approach Integrates the acquired firm as a business unit in its own right, but with a tightly defined functional role.

Adopts a flexible policy to integrate offering each acquired company a unique structure as part of the acquired firm

Successful and Unsuccessful Acquirers

Michael E. Porter

Cluster Analysis, Value Chains & Competitive Strategy

Three Generic Strategies

Strategic Advantage

Uniqueness Perceived By Consumer

Low Cost Position

Str

ateg

ic T

arge

t Industrywide

ParticularSegment

OnlyFocus

OverallCost

LeadershipDifferentiation

Competitor Analysis

Competitor Response ProfileIs the competitor satisfied with its current position?

What likely moves or strategy shifts will the competitor take?

Where is the competitor vulnerable?What will provoke the greatest and

most effective retaliation by the competitor?

Future GoalsAt all levels of managementAnd in multiple dimensions

What drives a competitor?What the competitor is doing

and can do

Current StrategyHow the business is currently competing

AssumptionsHeld about itselfand the industry

CapabilitiesBoth strengths

and weaknesses

Porter, Competitive Strategy, P. 49

Bu

ye

r P

ow

er, e

g:

buyer choice

buyers size/num

ber

change cost/frequency

product/service im

portance

volumes, JIT

scheduling

Ne

w M

ark

et

En

tran

ts, e

g:

geographical factors

incumbents

resistance

new entrant strategy

routes to market

Com

petitive

Rivalry, eg:

number and size

of firms

industry size and trends

fixed v variable cost bases

product/service ranges

differentiation, strategy

P

rodu

ct/Tech

nolo

gy

Develop

men

t, eg:

alternatives price/quality

market

distribution changes

fashion and trends

legislative effects

Su

pp

lier P

ow

er,

eg

:

brand reputation

geographical coverage

product/service level quality

relationships with

customers

bidding processes/capabilities

Figure 7. Porter’s Five Forces of Competitive Position

Threat of New EntrantsThreat of competition from

new technology(in past from petrochemicals)

Bargaining Power Of suppliers

Restrictions on The supply of

beta-pineneThe required

feedstockOther producers of

geraniol

Industry competitiveness

Intensity of rivalry

Threat of substitutes

Possible reformulation with other rose materials eg.

Phenyl ethyl alcohol

Bargaining power of buyers

Concentration of usage into few major

compounders strengthen buyer

power

Adapted from Porter, M. E, Competitive

Advantage: Creating and Sustaining

Superior Performance, New York, Free Press,

1985

Porter’s Five Force Analysis for Gernaiol

Competitive Rivalries Lemongrass quick yield and straightforward to cultivate and distil – expect high elasticity of supply from both existing and new producers. Producers of substitutes very aggressive

Bargaining Power of Suppliers Collecting the most suitable planting material require effort. Extraction and harvest .technology needs to be acquired or developed Analytical equipment or service maybe expensive/remote.

Substitutes Citral (main constituents) can be produced from a number of chemical feed stocks. Alternative oils (litsea cubeba) cost much less to produce. Lemon myrtle oil much smoother and acceptable to end users Many alternatives to lemongrass in product formulations.

Trends & Technology Alternative technologies to steam distillation (CO2) can make much smoother oil but will increase capital needs greatly. Natural, exotic, organic, FAIRTRADE could increase oils popularity (?) if seen as exotic.

Substitutes

Tre

nd

s &

Te

ch

no

log

y

Bargaining power of buyers

Bargaining power of suppliers

Competitive Rivalries

Re

gu

lati

on

Regulation SCCP placed lemongrass oil under scrutiny as a cosmetic ingredient in EU.

Industry Competitors

Intensity of Rivalry

Bargaining Power of Buyers Currently small item of trade in flavour industry, strong relationships with established producers.

Industry Phase development of SAIPIndustry Phase development of SAIP

Ro

le & R

each o

f SA

IP

Ro

le & R

each o

f SA

IP

LOWLOW

HIGH

HIGHSNP

FRUITS

PRODUCTIVITY ADVANTAGEPRODUCTIVITY ADVANTAGE

VA

LU

E A

DV

AN

TA

GE

VA

LU

E A

DV

AN

TA

GE

FLOWERS

VEGETABLES

MARINE

LIVESTOCK

I

II

III

LOWLOW

HIGH

HIGHSNP

FRUITS

PRODUCTIVITY ADVANTAGEPRODUCTIVITY ADVANTAGE

VA

LU

E A

DV

AN

TA

GE

VA

LU

E A

DV

AN

TA

GE

FLOWERS

VEGETABLES

MARINE

LIVESTOCK

I

II

III

Phasing of SAIP in order to ensure a clear focus and fast cluster development!

Depending on Logistics Infrastructure Scenario SAIP could provide a wider reach -> Starting with only a 100 km radius to entire Sabah!

The Value Chain