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Project I completed in college regarding a hypothetical company trying to expand internationally.
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Ian Harkavy
International Business 200
GumYum, Inc.
Background Situation Analysis Strategic Advantages; Economic and Cultural Factors
Market analysis Market Size; Market Potential; and Competition
Potential Entry Strategy Implementation plan Brazilian Preferences Product, Place, Price, Promotion
Breakeven and S.W.O.T. analysis Future outlook
GumYum, Inc.
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Largest country in South America
Mostly tropical climate, though
temperate in the South Leading producer of agricultural
products Recurring droughts in the
Northeast with occasional floods and frost in the South
Population: 203, 429, 773
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Multiple borders 7,491 miles of coastline
8,233 square miles of
renewable water resources 1.134% population growth
Low cost of production
Competitive advantage for
sugar production
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Steadily improving macroeconomic factors by building up foreign reserves
GDP (2010): $2.194 trillion GDP growth rate (2010): 7.5% GDP per capita: $10,900
Labor force of 103.6 million 7% unemployment rate
26% of population below poverty line $199.7 billion exports $187.7 billion imports 1.77 Brazilian Reals (BRL)= 1 USD
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Languages: Portuguese
88.6% literacy rate 87% of total
population is urbanized
67% of population
between the ages of 15-64
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Primary market: males and females between the ages of 13-50
Food retailing accounts for around 30% of total retail sales, approaching $50 billion in Brazil alone
Population of over 200 million Poorest 20% of Brazilians account for only 2% of income Wealthiest 2.5% earn over 30% of all income
Brazil is the world’s third largest market for sweets
Confectionary value sales have risen 46% between 2004-2009
Gum sales: 2008- $1,286,000,000 2009- $1,207,000,000 2010- $1,460,000,000
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Current economic stability and lower inflation
Surging sales among poorest 50% of population
Benefits from free trade agreements
Huge potential for
growth and variation to appeal to many customers
2008-2013
2008 2009 2010 2011 2012 2013
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Hershey
Nestle Brasil (10% market share) Especialidades Mentex, Nestle Classic, Alpino,
Chikito, Galak, Nescau, Seducao
Kopenhagen
Cadbury Adams (74.9% market share) Trident, Ping Pong Ploc, Clorets, Plets Leader in the gum industry
Arcor Group Over 50 brands across product categories in
Brazil Sambapito, Big Big, Poosh, Samba, Blow Up
and Tortuguita
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Point-of-purchase merchandising
Awareness of health-conscious consumer preferences
Mass production possible in the gum industry
Santos Port
Introduce new flavors into the core flavors market “Burst and fade” effect Ex: Pineapple, banana
Majority of growth in the Brazilian market is due to the increase of sales of sugar-free chewing gum One of the fastest growing subsectors in the whole confectionary industry Consumers are heavily influenced by the benefits to dental health that sugar-free gum
can provide A growing number of products exploit this considerably
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Contract with independent distributors and wholesalers to handle logistics and supply
Electronic-data-interchange system
Use transportation company with the longest and strongest presence in each region Lower costs and greater speed More sophisticated control of distribution
Maintain the highest green and eco-friendly
standards
Have salespeople work in tandem with the distributors worldwide
Colón port of Panama
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Geocentric staffing approach Eliminates cultural barriers Builds a strong, unified culture Uses HR efficiently
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Make it last long with full flavor to remain competitive in the market
Wrapper games Eco-friendly wrapper and
packaging Offer different flavors and
sizes Fruity and minty varieties Whitening and cavity
protection Calorie counters
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Free samples
Bonus packs Rebate promotions
Advertising: Sporting events Magazines Commercials Billboards
Celebrity endorsements (Gisele Bundchen, Kaka)
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Partner with Wal-Marts and other large retailers/grocery stores nationwide to sell at registers
Gas stations and mini-marts
Newspaper kiosks
Padarias (hybrid bakeries) Centralize production in major
cities Salvador Sao Paulo Rio de Janeiro Brasilia
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Convert Brazilian reals to US dollars 1 USD = 1.5630 BRL 1 BRL = 0.6398 USD
$0.99 pack of gum = 1.55 BRL
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Packaging to combat the hot climate
Majority of growth in the Brazilian market is due to the increase of sales of sugar-free chewing gum One of the fastest growing subsectors in the whole confectionary industry Consumers are heavily influenced by the benefits to dental health that sugar-
free gum can provide A growing number of products exploit this considerably
Curb your appetite by chewing gum
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≈ $6,000,000 in capital for plant
Cost of labor per year for 500 employees: 500 x $8,230 (GDP per capita) ≈
$4,115,000
Cost per pack of gum ≈ $0.03
Cost to export to the rest of South America and/or Central America: $860 per pallet (7,500 individual packs or 625 cases containing 12 packs each) ≈ $0.11 per pack for shipping, $1.32 per
case Sell pack of gum for the equivalence of
$0.99 worldwide Mass order quantity discounts Intra-national shipping discounts
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YEAR 1 Estimated market share = 2%
Sales: 10.27M at $0.99/unit 10,167,300 Fixed Cost Plant: $6M Operation: $0.1M Labor: $4.115M Variable Cost Package: $0.03/unit Shipping: $0.11/unit Total Cost (11,652,800) Net Income before Tax (1,485,500)
YEAR 2 Estimated market share = 5%
Sales: 25.67M at $0.99/unit 25,413,300 Fixed Cost Depr: $0.6M Operation: $0.1M Labor: $4.115M Variable Cost Package: $0.03/unit Shipping: $0.11/unit Total Cost (8,408,800) Net Income before Tax 17,004,500
We will roughly break even on year 2
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Strengths Weaknesses
Opportunities Threats
•Imports and exports are booming as record numbers of exporters are gaining EU licenses
•Brazil’s huge population offers substantial return potential
•Brazil’s large market makes it an attractive target for international retailers
•The convenience store formats are set to experience rapid growth
•Well-established and reputable competition already in place •Income inequality, with consumption patterns varying significantly according to salary •Regional cultural variations limit the extent to which producers can rely on a single marketing strategy for the entire Brazilian market
•Trade officials are encouraging exports to countries other than the US , resulting in significantly higher total export volumes
•Brazil has more unused commercially viable land than any other country in the world, potential for incumbent as well as new producers
•Economic stability cannot be guaranteed over the longer term
•High interest rates place constraints on company investment plans
•High inflation would have severe consequences on this market, because price-stretched consumers would cut back on non-essential purchases
•Rising production costs
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The Brazilian gum confectionary market grew by $17.3 million in 2009, to reach a value of $508.3 million
Between 2010-2015, value sales are forecast to increase by a further 41% Gradual trend towards the purchase of premium confectionary
products, particularly among Brazil’s growing middle-class population
By 2015, the market is forecasted to reach a value of $683.5 million, an increase of 25.8%
Between 2005-2009, per capita food consumption increased by 49% In the next 5 years, it is expected to grow by almost 54%
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http://www.alibaba.com/countrysearch/BR/gum.html
http://www.datamonitor.com/store/Product/gum_in_the_bric_brazil_russia_india_china_countries_market_overview_and_forecasts_to_2014?productid=DBCM7234
http://www.21food.com/product/search_keys-Chewing+Gum_c-Brazil_cat-101503.html
http://store.mintel.com/gum-confectionery-in-brazil-2010-market-sizes.html
http://www.marketresearch.com/product/display.asp?productid=2850847
https://www.cia.gov/library/publications/the-world-factbook/geos/br.html
http://www.obamonteverde.com.br/
http://www.brazil-factoid.com/doing-business-in-brazil.html
http://www.brazil-factoid.com/sao-paolo-contribution-to-brazils-design-as-an-emerging-superpower.html
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