Factors Affecting the Market Entry Mode
The company Green Chef, is a US based company that delivers organic meal kits. It delivers a wide range of products for the consumers that require organic, vegan, paleo, and keto dietaries. They provide fresh ingredients and easy to make home recipes, mainly focusing to promote a sustainable and healthy lifestyle (Green Chef, 2022). To expand the company into the global market, this report discusses the market entry strategies and compares direct association to the joint venture discussing the factors that affect the choice of the market entry mode. It discusses Green Chef’s joint venture with Amazon as a to-be successful mode of entry into the market of Germany. It then discusses about the global trends like home seclusion, e-commerce and the climate and sustainability awareness how does it impact the local market of Germany for Green Chef. It also states the marketing mix strategies Green chef needs to standardize or adapt for promotion in the German Market.
In today’s era, where MNCs rule over the global economic market, it is important as well as necessary for a business to expand its boundaries and move towards internationalization for further growth of its organization. In order to make the best use of the resources of an organization, it must select the best strategy to enter into a market. A company can select the suitable mode of entry after analyzing the risk involved, the resources required and the degree of control the company would be able to exercise in the market (Robidas et al., 2021). For our case, the green field can either choose to enter into the German market by a direct arrangement with a leading supermarket chain or by entering into a joint venture with Amazon.
Some of the factors affecting the consumer and retail environment in Germany for choice of market entry mode:
Size of market: A company is on a higher chance to involve into a joint venture rather than solely-owned sales if the market size is large since it will require monitoring over larger population size and will require large amount of investment and resources for the channel of distribution. Small markets on the other hand can be channeled via licensing or exporting. Since Germany has a large market size, 83,166.7m Green Chef can consider operation through joint venture (Passport, 2021).
Government Regulations: Government imposes certain regulations on the entry of a new firm which may prove a potential barrier. For example, many gulf countries restrict direct entry mandating the firms to have local partners. EU provides preferential access of local products. Certain non-tariff barriers like traceability requirements and phytosanitary restrictions can make direct entry mode risky (Food Export Assoication, 2021). Also, Germany ranked 22nd in ease of doing business in the year 2020. Thus, considering these points, joint venture is a preferable option.
Economic and political stability: Political turmoil and instability in the GDP of the economy can cause hassle for the company to invest its resources and manage the operations. The greater unstable these factors, more likely the company is to distance from direct investment and favors joint ventures since it will enhance the firms’ flexibility to withdraw its association from the market (Hollensen, 2009). Germany scores 0.7 in terms of political stability (Passport , 2021). It has a FDI driven economic growth with GDP of 4536,620 which is quite stable. This point favors non-intermediary expansion.
Joint Venture with Amazon
International Experience: Previous experience with an international market helps the firms to commit extra resources into the foreign market thus investing in direct arrangement. Since Green Chef does not have sufficient international experience it is preferable to operate as joint venture with Amazon that has quite experienced supply base channel.
By considering the above factors of market entry mode, it can be decided that most of the factors favor Green Chef’s entry into Germany via a joint venture with the leading multinational ecommerce company, Amazon. Amazon offers features like Fulfillment by Amazon (FBA) and provides prime badge to the seller which helps in building customer trust (Amazon, 2022). A variety of services facilitated by Amazon like cross-market place advertising tools, budgeted adds solutions, will help the firm to reach the right target audience (Amazon, 2022). It also offers fast same day delivery services to its prime customers. Along with this Green Chef will continue selling on its own website. The joint venture will facilitate attraction of varied population that uses and trusts Amazon.
- Green Chef can take advantage of Amazon’s knowledge of the local market of Germany.
- Since the net revenue of Green Chef is moderate, $12.84 million, this joint venture will not create any type of burden in the overpayment.
- Since neither of the partners have full control over decision making, it can result in conflict between the partners.
- It will hinder full proprietary ownership status of Green Chef by Hello Fresh.
1) Home seclusion- The COVID-19 era is has witnessed and is still witnessing lockdown and home isolation in many parts of the world. With schools, offices, outings shut, people have been restricted stay indoors (Rees, 2020). As a result it has been observed that people are living isolated and avoiding large family stay/ gatherings. Also people having more leisure time are exploring their hobbies. This has led to indulgence of many people towards cooking as a hobby. This increase in trend of home seclusion and social distancing is beneficial for Green Chef as it provides packaged fresh ingredients and easy-to-make recipes that people staying alone can easily follow to prepare their own healthy meals. Also spike in cooking hobby is also increases the market for Green Chef. The trend of nuclear living or isolating is not so new in Germany. Germans are self-reliant since childhood and have a culture to stay independently during adulthood. They move out and prefer to live individually (Incluude, 2022). Hence, packaged deliverable items ease the job of self-cooking German youth. About 52% of German households cooked daily in 2021 whereas 30% Germans cooked twice or thrice a week (Statista, 2021).
Sustainability focuses on reducing harmful impact on environment by present generation keeping in mind the needs of future generation. The aftermath of COVID-19 has enlarged the social purpose of sustainability promoting corporations to display socially responsible behavior over monetary benefits, i.e. purpose over profit. 2020 was expected to be a crucial year towards transition to a low-carbon emissive economy (Euromonitor International, 2022). Green Chef being #1 Sustainable Meal Kit is committed towards safe environment and sustainable practices. USDA (U.S. Department of Agriculture) certified, Green Chef is determined to produce organic products with less food waste, provide 100% carbon emission offset with less than 25% of carbon footprint in their meal boxes. They are the first meal kit providers to use ClimaCell, a recyclable insulation in their meal packaging and aim to recycle more ocean bound plastic than used by them in their packaging (Green Chef Corporation, 2022). Hence they are committed to show a socially responsible behavior and abide to sustainability practices. Germany is highly concerned towards sustainable practices and awareness regarding climate and environment change. It aims to expand renewable energy to more than 80% by 2050. Germany’s sustainable development strategy focuses towards providing circular economy, climate protection, pollution reduction, and sustainable food and agricultural practices (OECD, 2022). Therefore, Germany and Green Chef both follow a same path towards climate protection and sustainable behavior.
Global Trends Impacting the Local Market
3) E-commerce- Restaurants and physical outlets being closed during the pandemic, e-commerce has replaced the traditional shopping trend. Also shift to healthier lifestyles has promoted customers to order groceries online and prefer home cooked meals over readymade food items. One more reason towards growth of e-grocery shopping is the notion of people to save money due to the negative economic impact of COVID. This shift in trend is beneficial for Green Chef as it provides home delivery of fresh ingredients. Germany, having one of the biggest e-commerce customer base in Europe, penetrating upto 74 % is only expected to rise even in future. The total sales in the year 2020 amounted to USD 83.1 billion. Also expectation has been made of increase in the online population up to 68.4 million in 2025 from current 62.4 million in 2020 (International Trade Administration, 2021). Green Chef should built and support easy-to-use mobile friendly websites as in 2020 54% of the purchases were made via phones. As seen in the passport analysis Germany consists of a wider aging population, Green Chef must focus on customer support services to facilitate and guide the elderly.
Marketing across borders increases the complexity of marketing strategy for the company since the diverse and new foreign environment brings more cultural, regional and geographical differences compared to the home environment which becomes harder for the business to cope up with. Company may either standardize the marketing procedure as in the previous (home) market or else might adapt to the local market of the targeted country. Both standardization and adaptation are two extremes of same continuum; hence if standardization has to increase, adaptation will decrease (Kraus et al., 2016). Studies suggest that none of the two are self-sufficient. Hence a company must adopt a mix of the two marketing methods.
Figure 1: Cultural Framework
Source: (Terpstra et al., 2012)
Some of the following factors that affect Green Chef’s marketing mix strategy in the external environment, Germany are as follows:
- Population: since the German population is mostly aged, featuring the middle age group in its promotional areas will relate to the customers better.
- Language barrier: Germany is an intercultural nation that consists of varied population including refugees. Green Chef needs to take care of the language barriers in the nation.
- Cultural Diversity: Green chef needs to represent the food culture of Germany in its recipes and provide staple products to the local population instead of standardizing to its recipes.
- Technology Driven: They need to take care of the advanced 5G scenario in Germany and offer highly technological and advanced websites.
Germans are very particular when it comes to their language. If the communication channel whether it be promotion videos, emails etc., are not appropriately written/spoken in Germany, the customers might develop a negative image of the company, since they didn’t value their native language. The citizens also speak Danish, Frisian, Sorbian, and Romani since the country is a mix of all these people. A good customer helpline service with German speakers and also speakers fluent in these minority languages would also be required. Hence, Green Chef needs to adapt to the linguistic practices of Germany. It will need to hire a native speaker for even its youtube channel videos and include these languages in subtitles.
Figure 2: Green Chef Youtube Channel
Source: (Green Chef, 2017)
Implicit execution style uses more visuals rather than the words. Explicit execution Style focuses on the words primarily. In high context communication the speaker focuses onto the meaning rather than to the words whereas in low context communication, the case is opposite. Cultures that opt for low context communication are more attentive to the literal words than to the context (Singh & Nordin, 2016). From the data it can be seen that Germans are more particular about the low context explicit execution, Green Chef’s slogan, name and the words it uses to deliver the message will attract the German population more than the images.
Marketing Mix Strategies for Green Chef
Figure 3: Difference in context among cultures
Source: (Bernier & Meyer, 2010)
Green Chef can standardize:
Social media platforms are the most important medium to reach to the customers in the modern era. Germany, as advanced it is in its technology, is actively engaged in various social media platforms. 87% of the German population is active on whatsapp, followed by 69% of youtube users. Facebook and instagram also comprises of 63% and 41% users respectively (Statista Research Department, 2021). Green Chef can open a common company profile on instagram and facebook to share its add promotions and seasonal promotion codes worldwide or regionally.
Figure 4: Green Chef Promotion Codes
Source: (Green Chef, 2022)
Conclusion
From the report we can conclude that the meal kit deliver company Green Chef can expand its operation in Germany, by entering into the local market through a joint venture with Amazon, an e-commerce company. It will need to take care of the global trends like home seclusion, e-commerce and cultural insights that will affect its operation in the local market of Germany. By reviewing the population bifurcation of Germany that comprises of middle aged people and the cultural insights of Germany focusing on the lifestyle of people, languages and technology drive, a marketing mix strategy of standardizing social media platforms and adapting to the message and delivery style is suggested for the brand, Green Chef.
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