Introduction to Cargills (Ceylon) PLC
Discuss about the International Financial Spill Overs to Emerging Market Economies.
Cargills (Ceylon) PLC is a corporate from Sri Lanka which was established in the year 1844. The company is built on strong foundation of ethics and values. Sustainable development of food industry is spearheaded by the guidance of trusted leadership in Sri Lanka. The company has made continuous investment in retail which has resulted in making Cargills the largest retailer in the island. It is famous for KFC franchise in Sri Lanka. The company is listed on the Colombo Stock Exchange. Ceylon Theaters PLC holds the controlling interest in the company. Cargills is engaged in banking, modern retailing, food manufacturing, restaurant, distribution and agriculture business.
The client company i.e. Cargills (Ceylon) PLC is expanding its business into the emerging market Mexico. The expansion to be made is of its retail business which is run under the brands such as Cargills Big City, Cargills Book City, Cargills Express, Cargills Food City, etc.
Mexico is at the top of the list of emerging markets of the world and is therefore selected as the host company. Mexico meets all the requirements of being an emerging market economy and therefore offers a number of market opportunities to Cargills for the expansion of its business. The country is now being known for making exceptional progress in bringing a higher quality of life to its most neglected regions. However, this target market may often present certain limitations for Cargills due to Mexican customs regulations, labor law and product standards (Cargills, 2018).
As the international marketing consultant of Cargills (Ceylon) PLC, two main issues namely countertrade and marketing communications are being considered in this report for expansion into the emerging market.
International marketing can be defined as the application of principles of marketing to more than a single country. International marketing is undertaken by companies across national borders or overseas. International marketing is often referred to as the extension of the local marketing strategy of the company by paying special attention to targeting, marketing identification and international decisions (Gillespie & Riddle, 2015).
A series of decisions are required to be taken by every business that aspires to operate in a new soil. There are a series of decisions required to be undertaken for this purpose. However, the most important decision is the first decision i.e. deciding whether to go abroad or not. There can be a number of reasons and benefits that encourage a business to take the business abroad. In order to provide recognition to the company, Cargills need to grab business opportunities which can make the company popular. This decision has the capability to allow Cargills to make affordable moves with long-term profit potential. This can also give a new life to the company. This decision is important as it can bring immense benefits for Cargills while it can also put Cargills into huge losses. Therefore, Cargillls need to take care while making this decision.
Expansion to the Emerging Market of Mexico
The next step is related to deciding the market to be entered by Cargills. As an international marketing consultant, Cargills is suggested to expand its business into an emerging market. An emerging market can be defined as the country that has certain features of a developed market but is incapable of meeting all the standards of a developed market. It is further suggested that Mexico should be selected as the emerging market where the expansion is planned. The per capita GDP of Mexico is only $ 12,000 short for quality for the developed country. The per capita GDP of Mexico in the year 2016 was USD 8,201.31. Economists predict a growth in the GDP of Mexico which will allow it to cross the barrier in the coming years. Mexico is considered to be the most attractive country in the list of emerging markets (Ahmed, Coulibaly & Zlate, 2017).
The next decision is related to the manner of entering the market. This includes the consideration of types of market entry strategy available for adoption. The company has not yet entered the international market. Therefore, in the next steps, it needs to make decision about the marketing programme to be used along with the marketing organization (Gonzalez, De La Torre & Milan, 2014).
Common market entry strategies that Cargills can adopt are setting up an entity directly in Mexico, exporting products directly or indirectly exporting the products using distributor, reseller or sales outsourcing. Other types of market entry strategy available for Cargills are franchising, licensing, exporting, joint ventures, business alliance, etc. There is no such famous example of countertrade between the home country and host country but there are a number of other examples from other countries (Yavas & Bilici, 2015).
The term countertrade can be defined as the reciprocal form of international trade in which the exchange of goods and services is made for some other goods and services rather than for hard currency. Countertrade is common in the less developed countries which also suffer from limited credit facilities and foreign exchange. Countertrade can be further divided into three categories namely counter purchase, barter and offset. Countertrade accounts for around 30% of all international trade. For example, in Mexico City, a barter market named Mercado de Trueque was established in the year 2012 by the local government for the purpose of helping the residents in trading their trash for food for the reduction of tons of waste (Geromichalos, Lee, Lee & Oikawa, 2016).
Considerations for Expansion: Countertrade and Marketing Communications
There are no properly defined principles of countertrade. However, there are two reasons due to which countertrade is used by developing countries. The reasons include exporting and importing. Purchasing power is used by the developing countries for encouraging the foreign countries to accept some part of their exports. When problems are faced by them at the time of financing imports, countertrade is used by them through traditional means.
Cargills should make the use of countertrade agreements instead of conventional pricing methods due to the existence of advantages such as ease in accessing difficult markets, avoidance of exchange rate fluctuations and debt, allows overcoming credit issues, new revenue of sales. It also offers marketing expertise which is mostly lacked by the enterprises. Furthermore, it helps a company in gaining competitive advantage over the competitors which, in turn, assists in increasing the market share. Mexico has pledged to rely on countertrade (cooperative compensation agreements) for the purpose of obtaining advanced technology and beginning major development projects in aluminum processing, sulfur production and other industries such as retail. Countertrade will easily allow Cargills to convert the foreign currency in Mexico which, in turn, offers an alternative to traditional financing. Also, Cargills will be able to make higher sales in Mexico due to the existence of fewer barriers. Furthermore, countertrading will allow Cargills to make better utilization of the capacity and will get easy access to the market of Mexico. Lower unemployment in Mexico mixed with counter trading will also offer immense benefits to Cargills. Countertrading has provided advanced technology to Mexico the benefit of which can be obtained by Cargills. For example, firms such as ITE, Global Barter Corporation (GBC), All Asian Countertrade and Bartercard use Countertrade due to its benefits (Higgins, Li, Devlin & Foley, 2015).
On the other hand, there are certain disadvantages of counter trading which cannot be neglected for the advantages. The disadvantages include handling business negotiations, trade restriction, uncertainty of traded products and services and that it can be time-consuming. Countertrade is an unconventional tactic. In a country like Mexico, the good trades will be bartered which will result in negotiations until the parties to the transaction are satisfied. In Mexico, the transaction costs such as brokerage are really high. This result in quick increasing of costs specifically at the time of finding buyer for the goods, commissions to middlemen and so on.
In Mexico, Cargills may also suffer from uncertain value proposition as a result of counter trading. This is feared in particular cases where the exchange of goods has significant price volatility. In case if Cargills undertake open market operations, it may suffer from point of concern related to interaction with different trade policies. Cargills may also face discrimination in the marketplace due to shift in terms and conditions and opportunities for trade advancement (Bussiere, Delle Chiaie & Peltonen, 2014).
Decision-Making for International Expansion
The application of EPRG framework provides that Cargills should adapt to the needs and wants of the people in Mexico in ethnocentric orientation. As far as the regiocentric orientation is concerned, there are very few similarities between Sri Lanka and Mexico. Furthermore, geocentric orientation provides the consideration of efficient use of human resources through informal management channels and building strong culture. Through the polycentric orientation, Cargills need to give equal importance to the domestic market of Mexico. Therefore, the EPRG framework must be taken into consideration while making management decision.
The application of 12C framework in the given situation provides information related to the following aspects:
Country- increasing GDP and improved lifestyle. Country is proceeding towards becoming a developed country.
Channels-Import- oriented distribution structure
Commitment- labor is highly committed for the development of the society and low government regulations
Currency- the inflation rate is quite high.
Communication- during the establishment of international business, transparent communication is maintained.
Capacity to pay- slowly and gradually, the capacity to pay is increasing.
Contractual Obligation- low
Choices (Media)- internet marketing
Consumption- the demand for retail goods is increasing due to increase in income and changed lifestyle.
Concentration- various companies are expanding business in this emerging market.
Caveats (legal applicability)- Low
Culture/Consumer behavior- the income of the consumers are increasing so they are able to afford expensive products.
This analysis provides that the expansion of business should be made in this emerging market.
The term marketing communications can be defined as the use of a number of marketing tools and channels in combination. The channel of marketing communications concentrates on the way in which a message is communicated by the business to its desired market. A tool for marketing communication can be personal selling, advertising, sponsorship, direct marketing, public relations, promotions and communication (Todor, 2016).
The traditional tools for international marketing communications which can be adopted by Cargills are:
Print- Print marketing is considered among the time-honored techniques and includes brochures, letters, pamphlets and other forms which are more familiar with the audiences. However, the costs involved in printing such advertising materials are very much costly in Mexico. Other factors to be considered include prevalence of print media and expensive advertising space.
Television- Cargills can also make the use of television marketing as the traditional method in Mexico as the advertising is related to the retail sector. Television is owned by almost everyone in the target country and target market. It will create more influence of the company and brand on the prospective customers.
Countertrade: Definition, Advantages, and Disadvantages
Radio- This is a simple method and involves less cost. The local audience can be made aware of the product and business through the radio advertisements.
Direct Mail- it is often observed that the response rates to direct mails are somehow higher than other methods of marketing communications.
However, with the passage of time, the digital/ modern methods have become more popular and have preceded the traditional methods. The international expansion can attain success only when proper methodology is adopted for the same. In order to reach the wide audience, modern tools are more appropriate. With the prevalence of internet in Mexico, the people are enabled to stay connected with businesses and it allows them to gain knowledge regarding the products appropriate for them. Following are some of the modern platforms/ tools for the marketing of the products (Bagautdinova, Belikov & Murtazin, 2016).
Social media- social media acts as an extremely powerful tool but also has the potential of getting out of hand very soon. Cargills can create the pages of its products on different social media websites by targeting different customer segments in Mexico. It will also help Cargills in getting immediate response of the customers in the form of feedback and will assist in resolving their queries.
Search Engine Optimization (SEO) – SEO can be utilized as a valuable tool for the purpose of dealing with online traffic. Customers in Mexico will be able to Cargills and Cargills will get client attention with the help of this method. SEO will ensure the visibility of the brand with the help of organic searches. The customers from Mexico will be able to say first results from Cargills company on the internet search (Belch, Belch, Kerr & Powell, 2014).
Pay Per Click (PPC) – International pay per click campaigns are somehow similar to international SEO. Cargills will get benefitted from local search volumes results for target company i.e. Mexico. It will also help Cargills in knowing the keywords having highest search volume in Mexico.
Internet and related technologies such as blogs, social media, mobiles, virtual worlds, video/ podcasting can play an important role for Cargills for the purpose of creating awareness regarding the products in the international market. Blogs are widely read if written keeping in mind the needs and interest of the readers. People from Mexico and other parts of the world get more attracted towards advertising done through videos. Internet is now being widely used in Mexico and therefore Cargills should give prime importance to this modern platform for international marketing communications. It will help Cargills in the achievement of marketing objectives faster than by way of traditional methods. It will further help in gaining improved revenues due to immense popularity with reduced costs. Internet and these related technologies will allow Cargills to communicate with the prospective customers in Mexico by improving interaction and gaining knowledge regarding customer preferences and experiences (Srinivasan, Rutz & Pauwels, 2016).
Applying the EPRG Framework
A number of benefits can be gained by Cargills by making the use of internet and related technologies for marketing communications in Mexico.
Specific Targeting- The most important benefit is specific targeting. Search engines have automatic filters that are capable of screening the search history of the users and identify the products most searched for and desired by the user. Then it uses the data for showing relevant results to the user. In this way, internet marketing will help Cargills to target specific users in Mexico.
Efficient and Low Cost- internet and related technologies are less expensive than the traditional methods which involve high costs. Furthermore, it is efficient due to its influential nature. Videos, blogs, etc. attract the viewers and play an important role in efficient sharing of information. The videos and posts can be uploaded on social media which further has wide reach. Slowly and gradually this method will also help Cargills in building a social community which is the most audience-centric way for the promotion of business online (Joseph, Cook & Cook, 2015).
Easy Accessibility and Reach- internet and related technologies will play an important role in promoting easy reach and accessibility of the business to the targeted customers in Mexico. Digital communications, app developments, mobile and web will create awareness among the targeted customers regarding the affordable prices of the retail products, typography, logo, brand imagery, taglines and additional words, etc.
Flexibility and Adaptability- With the help of internet and related technologies, Cargills will be able to meet the ever-changing requirements of the market. However, the marketers of Cargills will also be required to become equally willing to adapt and change. The use of internet and related technologies provide flexibility by preparing for the adoption of new practices, updating the knowledge base and skill set, keeping up with the best practices of the industry along with staying updated with latest trends and technologies. Google algorithm is the great example of the rapidly changing technology. The algorithm is updated from time to time through the release of new version. This, in turn, changes the way in which SEO specialists and digital marketers approach their craft (Papadopoulos & Heslop, 2014).
Better Customer Engagement- internet and related technologies helps in maintaining better customer engagement. This can be done by Cargills by sending emails for thanking them for visiting the stores and for making them aware regarding the offers and discounts on various products. Internet will allow Cargills to humanize the brand. Also, the use of social media websites can be used for the purpose of customer engagement. The customers will get aware regarding the brand and will be able to offer their suggestions and feedback on the products. In this way, they will get engaged with the brand. The communications with the customers also get personalized through internet and related technologies (Kuazaqui, 2015).
Applying the 12C Framework
Other benefits of marketing through internet and related technologies include improved reputation and access to more honest feedback.
Conclusion
This report focused on the expansion of the client company Cargills (Ceylon) PLC into the emerging market of Mexico. The expansion is planned of the retail business which is run under the brands such as Cargills Big City, Cargills Book City, Cargills Express, Cargills Food City, etc. As the international marketing consultant of Cargills (Ceylon) PLC, two main issues namely countertrade and marketing communications were considered in this report for expansion into the emerging market.
The report highlighted the steps and the series of decisions involved in the consideration of the expansion plan. The first decision was considered to be the most important decision which is related to making decision regarding whether to go abroad or not. The reasons and benefits of deciding to go abroad have been specified in this report. The next decision is regarding the market to be entered. The emerging market of the country Mexico is selected for this purpose. Furthermore, decisions are required to be made in respect of market entry strategies. There are a number of advantages and disadvantages for Cargills for making the use of countertrade agreements. Moreover, with the advent of internet and related technologies, the marketing of products in the emerging markets have become easier and simpler. There are a number of international marketing tools such as social media, search engine optimization and pay per click which helps in efficient marketing of the products. The benefits of using internet and related technologies for marketing of products include specific targeting, efficiency and cost reduction, easy accessibility and reach, flexibility and adaptability, and better customer engagement.
This report implies that the business must consider entering into the emerging markets for its expansion and growth. The management of Cargills (Ceylon) PLC is recommended to expand the business in the emerging market of Mexico. The marketing of the retail business should be undertaken with the help of internet and related technologies due to the above benefits and effectiveness. Furthermore, the use of countertrade will also offer a number of advantages.
References
Ahmed, S., Coulibaly, B. and Zlate, A., 2017. International financial spillovers to emerging market economies: How important are economic fundamentals?. Journal of International Money and Finance, 76, pp.133-152.
Bagautdinova, N.G., Belikov, N.S. and Murtazin, A.A., 2016. Internet marketing as a factor of development of small and medium business in conditions of economic crisis. Academy of Strategic Management Journal, 15, p.50.
Belch, G.E., Belch, M.A., Kerr, G.F. and Powell, I., 2014. Advertising: An integrated marketing communication perspective. McGraw-Hill Education.
Bussiere, M., Delle Chiaie, S. and Peltonen, T.A., 2014. Exchange rate pass-through in the global economy: the role of emerging market economies. IMF Economic Review, 62(1), pp.146-178.
Cargills. 2018. Company Profile, , [Online] Available at: https://www.cargillsceylon.com/AboutUs/CompanyProfile.aspx [Accessed on: July 2018].
Geromichalos, A., Lee, J., Lee, S. and Oikawa, K., 2016. Over-the-counter trade and the value of assets as collateral. Economic Theory, 62(3), pp.443-475.
Gillespie, K. and Riddle, L., 2015. Global marketing. Routledge.
Gonzalez, J.C.T., De La Torre, M.C.A. and Milan, P.M., 2014. Present status of the implementation of strategic environmental assessment in Mexico. Journal of Environmental Assessment Policy and Management, 16(02), p.1450021.
Higgins, P., Li, K., Devlin, J. and Foley, A.M., 2015. The significance of interconnector counter-trading in a security constrained electricity market. Energy Policy, 87, pp.110-124.
Joseph, W.B., Cook, R.W. and Cook, K.J., 2015. Measuring Internet Marketing Productivity: A Study of Fortune 1,000 Companies. In Proceedings of the 1999 Academy of Marketing Science (AMS) Annual Conference (pp. 410-414). Springer, Cham.
Kuazaqui, E., 2015. A Discussion on Entrepreneurship, Creativity, and Innovation Applied to International Marketing. Economics, 3(1-2), pp.54-70.
Papadopoulos, N. and Heslop, L.A., 2014. Product-country images: Impact and role in international marketing. Routledge.
Srinivasan, S., Rutz, O.J. and Pauwels, K., 2016. Paths to and off purchase: quantifying the impact of traditional marketing and online consumer activity. Journal of the Academy of Marketing Science, 44(4), pp.440-453.
Todor, R.D., 2016. Blending traditional and digital marketing. Bulletin of the Transilvania University of Brasov. Economic Sciences. Series V, 9(1), p.51.
Yavas, B.F. and Bilici, H., 2015. Countertrade as a Reaction to Lack of Liquidity. In Proceedings of the 1993 World Marketing Congress (pp. 26-26). Springer, Cham.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
