Executive Summary
The paper critically analyses various management and marketing principles worthy of consideration in the event where an organization plans to venture into international market. Companies need to develop their strategies based on some strategic variables such as; resource-based strategies, industry-based and institution-based strategies. The paper starts with introduction followed by brief background history of the company in this case Kopi Luwak coffee Company based in Sumatra region in Indonesia. This is followed by brief synopsis of the previous work done on the coffee industry within Australia market. Then there is discussion justifying various recommendations on the mode of entry.
Analysis of external and internal environment is done from which the organization’s tangible, intangible resources and capabilities are analysed. SWOT analysis of Kopi Luwak Company is done as well as competitor analysis, where various coffee companies within Australian market are discussed with explicit discussion on challenges they present to Kopi Luwak Company’s entry into the market. Then there’s discussion of the company’s marketing objectives, generic marketing, market segmentation and marketing mix based on product preference and communication then finally conclusion. The company discussed in this article is an Indonesian Coffee making company with a plan to venture into Australian market.
Introduction
Kopi Luwak Coffee Company from Indonesian Island of Sumatra has been associated with producing impressive and quality Coffee since it was established. The company was established for the purposes of subsidizing the shortage which was experienced from other coffee types such as espresso coffee beans. Its introduction led to the development of Indonesian fine Coffee industry making Kopi Luwak to become one of Australia’s largest suppliers of quality premium coffee. The taste of Kopi Luwak coffee attracted huge demand making the company’s brand to be sold at leading retailers’ outlets within Asia-Pacific region, Japan and the US markets (Kopi Luwak, 2011).
The strength of the Company is the fact that its premium Coffee came with fine taste. The current new generation team managing the company system has embraced new technologies which have ensured consistent and frequent supply of quality products. Kopi Luwak’s Coffee portfolio appears amongst top ten celebrated brands all over the world. According to consumers, Kopi Luwak produces world’s most exotic and prime Coffees which have been of remarkable quality for the past many years. The whole study has been analyzed by emphasizing on the positive impact of information flow on industry performance with reference to Kopi Luwak Coffee Company performance in Australia (The Australian Coffee Traders Association, 2006).
The current strategy on how Kopi Luwak plans to capture Australian market and its position within the Coffee industry is discussed. This case analysis addresses whether Kopi Luwak is capable of maintaining its status within Australian and Indonesia market as one of the leading Coffee producers and distributors within the global market. The case largely concentrates on the possibility of Kopi Luwak’s products succeeding in Australian market. The company plans to approach the international market through various means which include; brand image, culture and economic strength. The report provides some information concerning domestic market within Australia and Indonesia. The information is used to uncover the various opportunities and threats within these markets and ways of countering any negative forces.
External analysis
Success of Kopi Luwak Company within the international market depends on the appropriate implementation of future strategies as well as individual variables. The various external influences which might dictate the performance of the company at international level include; political, economic, social, technological, environmental, and legal variables. These factors have got either positive or negative influences on the performance of the company hence ultimate effect on profitability and success of the Company. Kopi Luwak should consider cautiously the business environment within Indonesia. However, Indonesia operates under immense levels of bureaucracy making it a difficult destination for starting up a business as a foreign exporter. Furthermore, most of its population lives on less than a dollar a day.
Brief background of the company
Kopi Luwak is one of the names used to refer to specific cultivars and blends comprising of Arabica, Robusta, liberica, excels making variable tastes. The coffee from Kopi Luwak is known to have shared aroma profile as well as flavour characteristics and most importantly they have slight or no bitterness at all. History reveals that Kopi represents an Indonesian word for coffee and Luwak being local name used for the Asian palm civet in Sumatra Indonesia.
Civets are known to feed on berries and pulpy fruits. Coffee beans were initially gathered in the wild from the remains of civet, they were gathered, washed, sun dried and slightly roasted to produce different flavours free from bitterness (IBIS World, 2000). Kopi Luwak has brands with very smooth profiles made out of light roasting such as Iced Kopi Luwak Brews and Tagalog cafe alamid. The company’s brand is one of the most expensive coffees currently in the world market valued at between US $ 100 and $ 600 per pound (Kopi Luwak, 2011).
International Market
The Australian coffee industry produces high yielding and quality Arabic coffee. The industry is characterized by low labour costs as compared to other countries. The world coffee market is considered vast with over 7 million tones of dry green bean coffee traded at close to over US $11 billion. Currently Indonesia is known to be the world’s third largest coffee producer, the world having more than sixty different types of coffee (Arabica’s Coffee Australia, 2006). There’s potential increase in demand for coffee within the world markets especially Australia providing good grounds for further growth in import and local production. Development within the technological field as well as internet provides a major boost to the industry’s marketing strategies which can now be considered reliable and efficient.
Mode of entry and recommended initial business strategy
Organizations wishing to have international market success or high profitability should be prepared for stiff battle within the global market place. Kopi Luwak should make appropriate use of its public relations tools for the purposes of gaining good competitive ground. This is possible on the basis that Kopi Luwak resorts to offering better advertisement of their products brand compared to other competitors within the Australian market such as Coffex, Danes, Aroma, Belaroma and Grinders. Kopi Luwak Company should use its instruments to cover the special needs ignored by local coffee companies in Australian market segments, one of them being provision of non-bitter coffee (Australian Coffee Research and Development Team, 1995).
The supply of coffee within the Australian market is also far less than the demand for coffee. For the purposes of winning public confidence the company should be endowed with offering the best prices for premium brand Coffees. There is also bad reputation on local coffee brands owing to poor processing methods. This provides and opportunity to produce consistent quality coffee which rewards production as well as differentiating high quality coffee (Australian Coffee Research and Development Team, 1995).
Competitor’s strength and weaknesses could be assessed through analyzing what consumers’ value within the market. This can be achieved through interrogation of customers concerning their values on the products and the important attributes they consider in grading company’s products in comparison with other competitors within the marketplace. Such comparisons help Companies identify various areas which seems easy target for other competitors.
SWOT Analysis
The strength of Kopi Luwak Company lies in the fact that its Coffee has got outstanding taste with no bitterness and also maintains outstanding relationships with distributors within Australia and overseas. This allows them ample space, enabling distributors to have more responsibility of branding them as well as marketing their product. The company boasts of maintaining strong financial base which makes it easier for them to co-ordinate activities with confidence.
Throughout the years they have developed strong and popular brand image and marketing campaign tactics for their products i.e. its use in the 2007 movie “The Bucket List”. Kopi Luwak has a strong portfolio as one producing top quality Coffees such as Iced Kopi Luwak Brews. The process of vertical integration of the supply chain has enabled Kopi Luwak to control costs and better manage quality control (Grant et al, 1988, pp. 771-801).
Weaknesses of Kopi Luwak Company comes in its lack of sustainable competitive advantages such as excellent publicity through advertisement. This portrays big challenge to the company’s penetrative abilities owing to high rivalry within the Australian industry. They have no merger or partnership with any Coffee company which could assist them to easily penetrate the Australian marketplace. Such potential weakness could lead to huge financial losses.
Opportunities for Kopi Luwak Company lay in the fact that it shares some of the cultural roots with Australia being an immediate neighbour. Political relationship between the two countries is at best point, granting a peaceful environment for business. This could enable Kopi Luwak Company capture considerable Coffee drinking population within Australia and Indonesia. Australians are high consumers of coffee and the population feels proud of their traditional strong coffee culture handed over to them by European Immigrants.
The increasing popularity of Kopi Luwaks premium quality and non-bitterness could be utilized to satisfy the market environment. This could be used to increase the company’s economies of scale and distribution networks as well as brand recognition (Mclver, 2006). One of the threats faced by Kopi Luwak Company’s operation in Australia is that its domestic profitability depends on the nature of Australian currency which on the other side varies in relation to other stronger currencies of the world. This could be of great damage to the company’s profitability whenever the currency declines in value. The other threat to financial performance lies in the possibility of differences in tax and tariffs within these two countries (Raymond and Paul, 2000).
Competitor Analysis
Kopi Luwak Company has got potential threat from substitutes. There are many choices the consumers could opt for inform of beverages. These include alcoholic drinks, non-alcoholic beverages as well as liquor. The populations within Australia are used to their traditional strong coffee which command better size of the population (Chen and Chen, 1998, pp. 445-467). The Australian Coffee industry is currently getting numerous supplies from the exotic coffee brands and this presents some threat to Kopi Luwak’s local supplies. In the Australian market the people are very much health conscious hence prefer taking special type of premium Coffee drinks.
There is stiff competition from large firms like Danes, Aroma and Belaroma. Danes and Grinders commands good local market segment as well as foreign market especially United States of America and Japan. However, it makes it difficult for small companies to compete with large Coffee companies like Danes and Kopi Luwak since such large companies have got the advantage of economies of scale. Forward integration in the value chain allows large companies to have cost advantages over smaller companies. The other disadvantage to small scale providers is that Coffee industry requires heavy start-up capital making the industry appear unattractive to new aspirants (Chen and Chen, 1998, pp. 445-467).
Bargaining power of buyers presents moderate threat for the Coffee industry within Australia and Indonesia. Kopi Luwak should be aware of taste preferences of Australian consumers in line with what their brand naturally lacks. There is also price sensitivity within various markets, the local Australian brands are sold at cheaper prices owing to cheap labour and maintenance costs in the production process. Kopi Luwak should be prepared to be subjected to the market demand price, and therefore more restricted as to what they could charge. Buyers also have some power due to the fact that costs of switching to different brands are low. Kopi Luwak Company should aspire to keep their customers satisfied in terms of quality and price with their product or else they can easily switch to other brands (Christine, 2000).
Rivalry among existing competitors
The competitive nature of Coffee within the global market is on the increasing trend making it difficult for Kopi Luwak to compete favourably within domestic and export markets. Australia is known to be one of the top Coffee producers in the world making big percentage contribution towards the countries economy. The industry experiences intensified competition amongst top Coffee making groups of the world. Stiff external competition is experienced from other countries like U.S which produces double what Australian Coffee Industry produces. However, Australian Coffee is preferred due to its strong nature and reasonable prices (Snapdata International Group, 2006).
Intra-Industry Competition
There are intense competitive forces within Australian Coffee industry. This fierce competition represents the greatest threat for Kopi Luwak Coffee. Australian Coffee is known by the natives to be rich towards health, making the country one of the largest producers and exporters of Coffee worldwide. This makes the production and advertising sectors very differentiated. Stiff competition is experienced from domestic products other than import Coffees.
Domination of the market by few is possible especially if the companies agree to merge since this grant the benefits on costs, brand and economies of scale (Jong, 2000). In conclusion the market seems very attractive for Kopi Luwak Company, since they face low pressure from suppliers, low threat of new entrants and moderate buyer pressure. The industry is highly competitive with many substitutes available, these requires Kopi Luwak to stage appropriate strategies (Australian Coffee Research and Development Team, 1995).
Company and Marketing objectives for entry to target market
There is a possibility that those in the management team could act in a manner likely to reduce the company’s corporate reputation, especially when they have little understanding of the consumers’ culture and social needs. Marketing strategies used in Indonesia might not apply in Australia due to some reasons such as economic differences (Drinnan and Peasley, 1998). Kopi Luwak Company could also face the challenge as discussed earlier on frequent depreciation of currency.
One of the marketing objectives is to establish a branch in Australia which requires horde of changes within management structure, technologies, demand and other marketing dynamics. The differences in culture could pose more challenges in the company as well as the social set-up within Indonesia which threatens trust and mutual confidence in alliances (Keegan and Green, 2002; Kotler and Armstrong, 2006).
Stable financial position of Kopi Luwak Company is of prime importance since it determines its ability to respond positively to the community and the environment. This makes the Company posses strong abilities of attracting potential consumers. The management qualities as well as the quality of goods and services remain an important factor which determines the response of consumers towards Kopi Luwak products hence its durability within Indonesia market. All the drivers of financial excellence in an organization are basically linked to the extent on which the company utilizes its tools on public demand and this applies on both social and environmental sectors (Geringer, 2000, pp. 51-80).
Generic marketing strategies, marketing segmentation and positioning
Kopi Luwak’s reputation represents one of the factors determining the level of company’s interaction with local communities within Indonesia. The organization’s ability to grow is dependent on the support received from the community in terms of labour standards and respect macro-environmental factors. Public relations act as a link enabling smooth adaptation between Kopi Luwak Company products and the locals. The process enables the company to easily analyze issues which impact the society positively or negatively, hence adjust its services and products to suit public interest (Filatotchev et al., 2007). The products majorly targets youth and adult generation which forms majority of the population.
Kopi Luwak Company could easily loose societal approval when it experiences trouble with the labour force; this is a wake-up call for the company to build considerable market share within its native country as well as other segments within Japanese markets. The company could easily loose reputation by not adhering to government’s policies and regulations (Chen & Chen, 1998).
This can be very detrimental since it affects the market success of Kopi Luwak Coffees. This shows that good reputation and public relations should always precede quality of products and services. The nature of corporate social performance will greatly impact the company’s profit levels since it has strong influence on its reputations. Basically it is a direct influence on the company’s competitive advantage as well as its ability to attract and retain considerable consumer base within target market (Horton, 2005, pp 1-8).
Marketing mix strategies
Expanding internationally into other countries such as Australia provides better compensation to potential threats created by the volatile Indonesia’s economical status. Such kind of risks could be resolved by expanding further into global markets. This calls for further continuation of contracting distributors within targeted regions. It is of great benefit since local distributors understands their market environments better, hence having the ability of re-branding Kopi Luwak Coffees to suite local market. There is necessity for Kopi Luwak to consider expanding its product portfolio due to gradual changes within the social set-up which could help the company recover their competitive advantage (Gordon and Cutler, 2004).
Conclusion
Implementing appropriate strategies appears to be of great importance since it gives relevance to companies within various market segments. Appropriate planning of marketing strategies contributes towards improving organizational performance as well as maximization of profits within respective market environments. Implementation process involves allocation and matching of resources with the necessary means through which they could be utilized. All these are geared towards obtaining good customer base. Strategic planning assists in identifying the market desires while implementation process involves convincing the market concerning the quality standards of the company’s products.
References
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