See Candie’s International Candy Making Business
See’s Candies is founded and headquartered in America, California and it has more than 200 shops across America. For more than 90 years, See’s Candies has been enthusiastic on making candy in Mary See’s way. See’s Candies only uses the freshest and finest ingredients in making each recipe. There are no preservatives added to the candy. The quality of the candies can be tasted in every piece. It is well-known for tastiness, with the pleasantest customer service since the year of 1921.Today, there are 100 different candies and chocolates provided by See’s Candies. There are international store in Hong Kong, Taiwan and Japan.
The Product Line
As See’s Candies had successfully run manufacture and retail candies and chocolates in America and some of the Asia countries, there is an opportunity to continuously enter various countries with their products. There are several candies and chocolates which provided/manufactured by See’s Candies. As mentioned, See’s Candies has 100 different candies and chocolates, therefore, See’s Candies can attract the new market by their best seller product. The best seller of See’s Candies included Nuts and Chew, Toffee-ettes, Sugar-free Peanut Brittles and so on. The best seller products that mentioned have potential to be distinguished in the market as it has consumer intentions. Hence, the candies and chocolates product lines have the potential to be lucrative for See’s Candies as it continues open global market.Market Opportunity Analysis-PEST
The selection of potential market is an important decision which needed to take by See’s Candy to search for most suitable market. There are few factors that See’s Candy need to include in their consideration which are political, economic, social and technological.
According to PEST analysis, it designates some factors that See’s Candies needs to consider before entering into certain market. Malaysia is a potential and probable markets that See’s Candies to expand their business successfully.
For the political factors, the law of Malaysia is lenient after comparing with other countries. Furthermore, the ingredients used by See’s Candies are certified with Food and Drug Administration Guidelines. For the economic factors, Malaysia is in a stabilize economy lately. It provides a good opportunity for See’s Candies to enter Malaysia.
Besides, for the social factors, although Malaysia is a multicultural country but people in Malaysia have the same penchants. Therefore, it creates a good opportunity for See’s Candies to target market in Malaysia. Finally, for the technology factors, even though Malaysia is a developing country, but the technology is sufficient to support the operation of company. Hence, Malaysia is a good market for See’s Candies to penetrate.
There are numerous entry modes for See’s Candies to enter to the market of Malaysia. However, the preference choice for See’s Candies to enter the market of Malaysia is direct export. Direct export is a condition in which products of a company is sold right away to customers in another country deprived of using another organization or person to make provisions for them (Kotabe, 2005). The advantages for company in using direct export is it gains grander profit as it excluded most of the mediators. Besides, it controls the overall aspects and transactions. Direct export allows company to have better interaction in order to have better understanding towards their customer. The advantages that stated above shows how direct export well fitted with See’s Candies very much.
Production site is where the company manufactures their product. As See’s Candies based in California, it is difficult to direct export the products to Malaysia due to the long distance and the quality of the product might be affected. Hence, See’s Candies should set up a new foreign production site in order to reach Asia countries including Malaysia.
As mentioned, See’s Candies had opened the market in Hong Kong, Taiwan and Japan. Hence, See’s Candies should build up a production site in Japan as it is one of the Asia countries which already selling product of See’s Candies. Japan is one of the Asia countries which in the same continents with Malaysia. It can shorten the distance between these two countries to be compared with the home country of See’s Candies. It relatively caused the deduction of price in transporting the products to Malaysia. Besides, the high labour skill in Japan helps in the growth of the global market in Asia. As Japan is a developed country, its technology is sufficient for the process of production. The raw material of See’s Candies can be easily found in Japan or it can also be imported from foreign countries. Therefore, Japan would be the best choice for See’s Candies as production site as it benefits See Candies in the phrase of global market.
The diagram above shows the distribution channel that See’s Candies needed to go through in order to deliver their product to their end users. The production of the products is held in Japan as mentioned previously. After the production, the products will directly send to the port and export to the target market Malaysia. After the products arrived to the port in Malaysia, the products will be promoted to wholesalers by agency agents. Agents are a representative that assists in a business in transporting and selling their products in other countries (Coble, 2006). They might be paid the sales commission by the company or they hold distribution rights for specific products.
The products are will be sold to the wholesalers that introduced by the agents who have good understanding about the market. Wholesaler is an intermediary individual who in thedistribution channelthat usually buys products in bulk the products separately to resellers instead of selling directly to the customers (Ward, 2014). For instance, the wholesaler will sell the products to retail stores, supermarket or so on. After that, consumers are able to bargain the product and purchase the product. These are the whole channels that See’s Candies needs to go through in order to deliver the product to the consumers. As for See’s Candies, a reliable and responsible distributor must be found so their product can be distributed over the target market in Malaysia.
International Marketing Strategy
Export price decision
The price policy is the rule for a company to determine the selling price of the products or services (Investorwords, n.d.). For See’s Candies, the pricing policy will be “export prices higher than domestic price”. According to Albeum, G. and Duerr, E. (2011), this is a way for See’s Candies to have extra investment but, it also leads to extra expenses, slower turnover and several risks. However, this pricing strategy restricted distributers to export prices lower than domestic price in order to avoid dumping issue. This pricing policy can create a higher value for the exported products.
The price strategy is the method of determining the selling price of the products or services for a company(Suttle, n.d.). Among the pricing strategies, skimming will be the best method for See’s Candies. Price skimming is after a product is released, high price will be offered and the price will be lowered in the product’s life cycle in later time or when competition starts entering the market (Brookins, n.d.). Products which use price skimming strategy usually alleged as high-quality products. Therefore, in order to enter the market of Malaysia, it can be a product image with this pricing strategy. However, the price will be subjected by the competitors in the market.
The incoterms of See’s Candies will be CPT (Carriage Paid To). For this incoterm, the seller delivers the goods, cleared for export, to the shipper. The costs carriage necessary to deliver products to the destination will be paid by the seller too. However, the buyers have to bear on the risk of loss and any additional costs which occurred after the products are delivered (International Chamber of Commerce, n.d.). Although See’s Candies have to pay more on costs for CPT to be compared with CIF (cost, insurance, freight), but this will be less risky when See’s Candies exporting the products to other countries. Hence, this is the best choice for See’s Candies to reduce the rick during the delivery of the exported product to the other countries.
For the export product of See’s Candies, product standardization marketing strategies will be used. According Acevedo (n.d.), product standardization is an effective technique to decrease costs and upsurge the quality of product by diminishing the differences in the products. In this strategy, it designates that See’s Candies should produce the product in existing way and identical with the original product. Standardization brings cost saving in the packaging of the products. The quality of the products can be controlled with standardization. Therefore, product standardization marketing strategies is the best strategy for See’s Candies in entering the target market.
For See’s Candies, pull strategy can be used for export promotion. In this strategy, the information of the product will be known in certain way, and they will seek for the product by themselves. In this case, See’s Candies should choose the publicity to promote their product. Even though publicity somehow seems to be in push strategy, but for this case, it is more likely to pull strategy. According to BusinessDictionary.com (2014), publicity is a foundation to distribute information. Compared to other methods, publicity is not focuses on the products, but generally cover others related areas which included the status of company, market expansion at cetera. The cost of this promotion tool might be high and the content of publicity is written by the media but not the company itself, therefore there is no payment needed in this phrase. The content of publicity will be more reliable and objective because there is no commercial purpose because the media is the third among the company itself and customers (Albeum, G. and Duerr, E., 2011). Therefore, for See’s Candies, publicity is the best promotion tool because it is more reliable for the customers and it brings brand awareness in target market Malaysia.
The international trade is happened between two differ countries, the terms of payment is important decision for both importer and exporter which will affect the price mentioned. For Big Red Inc, it is delightful if the company select the “letter of credit” payment terms among the all eight payment terms. Letter of credit is a letter issuing from bank to another bank especially in foreign country which assurance the payment of buyer to a seller will be received on time which in the sum of the amount (Lorette, n.d.). When the buyers are not able to clear the payment of trade, the bank is required to pay the remaining amount of payment towards the purchase.
There are two segments in this payment term which are issuance and payments. The first step of the process of issuance involved the importer and exporter while dealing with the agreement. In this stage, it is all about the relationship between beneficiary (issuing bank) and client (advising bank). The importer will appeal quotation letter from the beneficiary. The beneficiary will communicate with the client after that. Lastly, the client will give advices to the exporter.
After that, the total payment of the purchase will be cleared. The shipment of the products will be ship from the exporter to the importer. After that, the draft, tittle and document will be handover to the client. The beneficiary will pay for the importer, then the draft, tittle and document will be transfer to the client. The importer needs to settle the bill from the beneficiary to get the draft, title and document. This is the process of letter of credit which needs to go through.
There are advantages in letter of credit for importer and exporter. The exporter able to reduce risk, receive payment during the shipment of the products so that they can able to calculate the payment accurately. The importer is able to control the time period of shipping the products and establish their affluence. No payment is needed to pay by importer before receiving the products. Since this payment method benefits both exporter and importer, therefore, this is the choice of payment methods for See’s Candies in this phrase.
Total Capital Budget
The project for See’s Candies will be estimated to last 4 years in the Malaysia market with the budget of USD10, 000,000 which stated in Table 1. Including the expenses and additional costs, the selling price will be USD10 which is around RM33.
The estimated sales for the 4 years of operation will be 85,000,000 units, which will generate total income of USD 85,000,000.00 (stated in Table 3). The cost of goods sold is the 40% (USD 1,200,000.00) of the total income and total expense will be USD 3,950, 000 (stated in Table 2)
The return of investment (ROI) will be 196.50% and the predicted total profit for See’s Candies will be USD 19,650,000. In a nutshell, 142,858 units of product must be sold See’s Candies in order to reach the break-even point.