International marketing Lecture 5 Formation of market entry strategies

1. International Marketing 463-441
Lecture 5
Formation of Market Entry Strategies

2. Types of Entry Strategies
Assessment of Threats and Opportunities
Strengths and Weaknesses
Product/Market Suitability
Assessment of Resources Required to Implement

3. Degree of Involvement

4. The Extent of International Involvement
Internet
Exporter
Exporting
Greater
Control
Importer And
Greater
Distributor Risk
Direct Sales
Contractual Arrangements Licensing & Franchising
Strategic Alliances
Strategic Alliances
Joint Ventures
Ownership Direct Foreign Investment
Cateora & Graham P. 323

5. Generic Global Marketing Strategies
Strategic Option Comment
1 Product and marketing practice Using the same strategies everywhere
extension
2 Product extension marketing While using the same products everywhere, using
adaptation marketing strategies according to local market
characteristics
3 Product adaptation marketing While using the same marketing strategies,
extension adapting the product offering according to market
needs
4 Dual adaptation Adjusting the product and marketing strategies
according to market needs
5 Product and market invention Innovating a new product and developing a new
marketing strategy for it in each market
Keegan, W., Global Marketing Strategies, Prentice Hall, NJ, 1999

6. Global Product Standardisation Types
High
(Global Scale)
Global Standardisation Modular standardisation
Aircraft and multi-brands
Microprocessors Elevators
Basic Chemicals IT services
Pulp and Paper Beer
Minimum Size Examples: BASF, Dell, Intel Examples: OTIS, Heineken
of Production
Process standardisation Local Adaptation
Cement Foods
Consulting services
Examples: Siam Cement Example: McDonalds, Carrefour
Low
(Local Scale)
Similar Different
(Local Segments)
(Global Segments)
Customers’ Needs Around the World

7. Structure

8. Distribution and Sales depend
on third party Retail Distribution
Very costly to undertake own
distribution if limited number of
products
Manufacturer Distributor
Retailers
Wholesaler

10. Retail Market
Local International Limited by Geographical
Locations
Supplier
Retail Outlet Consumer
Own
Manufacturing
i.e., Bata Shoes
Variation: McDonalds,
Pizza Hut, KFC
Good Profit
Margins

11. Good margins/rely on
regular change in Direct Marketing
merchandise
Direct
Manufacturer Marketing Consumer
Company
Dealer Consumer
Low Margin/High
Volume
Lack
Limited by number consistency in
of dealers and efforts
customers in
network Rely on continual
motivation and
getting new dealers

12. Direct Marketing Distributor Distribution Export Market
Cost 20 Cost 20
Cost 20
Margin % 58.33 Margin % 47.11
Selling 37.82
Margin % 55.50 Price
Selling 48
Price Freight, 37.82
Selling 45 Tax,
Price Landing
A&P 48 12%
Dealers &
25% Margin 44
Discounts
65
(SLM) 45% Margin 64 55%
83
(MLM)65% 20% Store 80
Store Price 80 Price
Consumer 100
Price Consumer 100 Consumer 100
(128) Price Price
• Not including VAT etc.

13. Product

14. Benefits and Technologies in
Cleaning Clothes
Problem Dirty Clothes
Hand Automatic local Dry
Washing Washer/Dryer Launderette Cleaners
Machine
Laundry
Powders Electrical Technology
Washing Powders Solvents
Liquid
Detergents Fabric Conditioners
Benefit Clean Clothes

15. Fulfillment: (dreams)
Actualisation
(The Artist)
Study after retirement
Self-fulfillment
Fresh vegetables (Organic)
Books
Fine Dining & Processed Foods Aromatherapy products
Luxury cars
Esteem Nutraceuticals & herbs
Travel & Vacations (The Executive)
Achievement, Fine Fragrances
prestige,fulfillment
Car Air Fresheners Responsibility: (hope)
Fashion Clothes (e.g.
Social (Worker) Jeans)
Chewing Gum Family, relationships,
workgroups
Community: (acceptance)
Most
Water Household
Safety (The Farmer)
Purifiers Cleaning
Home, Security and stability
Necessities: based on what is good (existence) Products
Fresh
Soap Vegetables
Physiological (The Hunter) Rice
Basic Biological Needs – Food, water, air
Staples: based on survival (fear)

16. Some General Differences Between European and Asian Cultures
European Asian
Modes of Thinking
Causal, functional Network, whole vision
Linear, absolutely horizontal Nonlinear, relatively vertical
Decision Making
To suit controls Based on trust
Individual free Group solidarity
To suit the majority Reaching Consensus
Behaviour
True to principals To suit a situation
Based on legal principals To suit a community
Dynamic, facing conflict Harmonious, conservative
Open, Direct, Self confident Restrained, indirect without assurance
Extrovert Introvert
Purchase Patterns
Individualistic Group Influences
Opportunistic Systematic
Horizontal Vertical communication

17. Demographics of Odour
Communication
Objective: to reinforce the belief of the Product
consumer in the desired and projected
image of the product Differentiation
Cleanliness
Citrus
Lemon
Perfumery
Marketing
Softness
Mix
Herbal
Green
Psychological
Association
Synergy with product presentation: packaging, colour, advertising, corporate image

18. http://www.brandingstrategyinsider.com/all_of_derricks_posts/index.html

19. Structure of Attributes for a
Fragrance in a Product
Fragrance Attributes
Signal
Features Benefits
Attributes
Tangible Intangible
Base Strength
Cover Benefits Benefits
Impact Romance
Pleasant Performance
Odour Fragrance
Profile Well-Being
Variant
Malodour Lasting
Counteractant Caring
Fragrance Indicator of Use
Substantivity
Security
Offensive Life Status
Ingredients
Eg essential Odour
oils Lifestyle
Cover Freshness
Association

20. Product Formulation
Ingredients Examples Europe Japan USA
Anionic Alkylbenzene 5-10% 5-15% 0-20%
Surfactants sulfonates
Fatty alcohol
sulphanates
Olefin sulphanates
Non-Ionic Alykyl 3-6% 0-2% 0-17%
Surfactants polyethenglygol
ethers
Nonyphenol
polyethyleneglycol
ethers
Suds control Silicones, parafins 0.1-3.5% 1-3% 0-0.6%
agents
Foaming Fatty acid 0-2% 0-5% 0-5%
Boosters monoethanol
amides
Ion exchangers Zeolit A, 5-10% 10-20% 0-45%
polyacrylic acids
Alkalis Sodium carbonate 5-10% 5-20% 10-35%
Bleaching Sodium perborate, 20-25% 0-5% 0-5%
Agents Sodium
percarbonate
Bleach Tetraacetyl 0-2%
activator ethylenediamine
Anti Cellulose ethers 0,5-1.5% 0-2% 0-0.5%
disposition
agents
Enzymes Proteases, 0.3-0.8% 0-0.5% 0-0.5%
amylases
Optical Stilbene-disulfonic 0.1-0.3% 0.1-0.8% 0.05-0.25%
Brighteners acid
Anti Corrosion Sodium silicate 2-6% 5-15% 0-25%
Agents
Fragrance 0.1-0.3% 0.1-0.3% 0.1-0.3%

21. Where in the Supply chain are you going to enter?

22. Producers of Chemical Feed
Small Holder Forest, Jungle wild Animal Extracts Stock
Producers plant Gatherers Manufacturer
Research
Local Collectors Institutes &
Universities Aroma Chemical
Manufacturer
Producers of Government
Essential Oils as By- Plantation
Products Producers
Producer Specialty/Aroma
Trader & Exporter Associations Chemical
Manufacturer
Broker
National FDAs
Trader, Importer &
Exporter
FEMA
IFEAT
IFRA
Agent
Flavour and Fragrance RIFM
House
IOFI
Standards
Agent Flavour and Fragrance Associations REACH
House (subsidiary)
SCCP
Cosmetic & Household Food & Other Food &
Personal Care Product Beverage Non Foods
Manufacturer Manufacturer Manufacturer Manufacturer
Wholesale Networks
Retail Networks
Consumers

23. The Essential Oil Value Chain (Flavour & Fragrance Industry)
Flavour &
Consumer
Essential Trading Fragrance End
Oil Compoundi Product Wholesal Retailer
Production ng Manufactur er
e
1.0 1.6 2-3.0 (6-9) 2-2.5 (18-24) 1.1-1.2 (19.8- 1.2-1.4
28.8) (23.76-
Relative and (Absolute) Value Added Through Chain 40.32)

24. The continuum from media reports to wisdom
in relation to availability and usefulness
Media Reports The Continuum from media
reports to wisdom in relation
Availability Increases
Ideas to availability and usefulness
Data
Information
Knowledge
Wisdom
Usefulness Increases

25. Validity based
Risk Environment in Essential Oil
on information Development
& Judgement
Laboratory Field Research
Research
Market Requirements of an
Essential Oil
Weather
Knowledge
and Skills Required Oil Yield, Quality for
Evaluation &
production/market Viability selection of
suitable
planting Land
materials Suitability
Propagation and Planting Costs
Assumptions &
Patience
Market
Crop Management Contacts &
Plant physiology & Knowledge of Network
propagation specific crop
protocols management
Harvesting & Extraction Costs techniques
All factors effect on
yield & quality
Knowledge of
Actual Yields and Oil Quality harvesting, handling
& extraction
techniques
De-stabilising
Event –
competitor, Volume and Market Acceptance
Other unforseen
regulation, new external factors –
substitute politics, disaster,
Economies of
scale & correct war, regulation, etc
business model,
Market strategy

26. Venture Focus Along Different Parts of the Supply Chain
Manufacture of end
products. Focus on
Consumers formulation and end Consumer
product Trends
development Important
Wholesalers & retailers
Vertcal Integration Along the Supply
Essential oil as
an ingredient in
i
a product.
Focus on uses
and applications Technical • Branding
research Trends • Theme
Manufacturers Important • Consumer
Marketing
• Reaching
Essential oil as • Application
primary Product. Mass or
Focus
Flavour & Fragrance Focus on market selected
• Technology Markets
Houses demand & supply
Focus
and meeting • New Product
standard • IP Focus (?)
Development
• Specific
Demand & Customer
Traders & Brokers Supply, Buying
Criteria Important
Chain
• Technical
Primary Producer Focus
• General or
Niche
Customers
Agro Industrial Consumer
Orientation Orientation Orientation

27. Supply Chain/Product Focus
Usually direct to
consumers through
internet and/or direct
Consumers marketing organisation.
Need branded Usually specialised end
specialised products with high profit
product, high
margins volume Usually branded item small
depends on packs, end product. Either
coverage selective (region or retailer
Retailers type), or general
Business focus distribution. High value, low
towards consumer volume with added
marketing away distribution costs.
from agricultural
This part of supply chain for
production smaller packs and end
Wholesalers products. Can be local,
national or international.
Value added method like
branding in use.
Need differentiated With differentiated
product. Above product some flexibility
average returns, Manufacturers to sell to
higher marketing manufacturers, costs
costs higher but increased
margin maybe
compensate.
Need high
volume due to Usually bulk oils to traders
low margin Trader who do all distribution.
unless Lowest price and little
specialised control over market, but
product wide distribution
Bi-products to Other Essential Oil Producer
Supply Chains

29. Cosmetic
High Organic production for
Cosmetic international
Essential Oil
production for market
Based Agro-
international
chemical
market
Market
Growth Essential
Oil under
CO2
extraction Crude
Essential Oil
Steam
Distilled
Low
Strong Weak
Relative Competitive Position

30. The Outcomes
(potential targets)
Key internal The process of Key external
Size and depth of change
influences on the product/market influences on the
development development development
Time
process process
The base potential for development
Where the business is
currently performing

31. Strengths Weaknesses
• Personal and enterprise competencies, • Competency gap
knowledge & experience that can be utilised • Short term timeframe, no fall back position
for the benefit of the enterprise if positive results delayed or there are
• Facilities, infrastructure, financial backing & technical or market failures
liquidity, long timeframe view • Poor infrastructure that hinders production
• Ability to learn through research and or marketing
experimentation • Shortage of funds to undertake project to
• Any network connections with industry and completion
access to the supply chain for both • Qualified or lack of commitment by any key
information and marketing people within organisation
• Ambition and vision (but not delusional), • Lack of network, knowledge and access to
focus & commitment supply chain
• Ability to innovate technically, market and
organisational wise
Any factor or group of factors that can Any factor or group of factors that can
assist the enterprise gain competitive hinder the enterprise gain competitive
advantage over its competitors. advantage over its competitors.
Opportunities Threats
• An identified market where enterprise • Competitors identifying the same
resources and competencies will be able to opportunities and enacting upon them
exploit • The regulatory environment and potential
• The potential opportunity will have a large changes within it
enough market size to sustain the enterprise • Inability to penetrate the existing supply
• The enterprise will be able to take advantage chain and make alternative strategies
of this opportunity better than any other • Dependence on survival from a single or
competitors very few customers
• Outside elements in the supply chain will • Depending on a single product for total
support the enterprise revenue
• Adverse acts of God, bad weather, drought,
etc.
Any factor or group of factors that will Any factor or group of factors that may
allow the enterprise to grow in a potentially hinder enterprise growth in a
sustainable manner from the market sustainable manner without any
environment. contingencies.

32. Local or International Market Opportunities
Local Market International Market
Essential Very Limited Unless Much Larger Market
Oil Large Domestic Market with Competition
Differentiated Limited Unless a Potential Large Market
Product Specific Market Exists Dispersed Worldwide
Specialty/End Potential with Right Potential with Right
Product Products and Correct Products and Correct
Distribution and Distribution and
Branding Branding
Diversification Depend on Location

33. Market Entry Strategy Typologies

34. General Competitive Strategies
Type Technique
Frontal Attack Meeting competitors head on
Outflanking Locating competitors weaknesses and attacking them
Encirclement Producing more types, sizes, colours, and styles of products at similar
or lower prices
Bypass Ignoring competitors present markets and technologies and doing
something different
Guerilla Warfare Using local dealers and distributors to attack certain products, product
lines, or channels

35. Timing of Entry

36. Potential Product Lifecycle IP Value &
Profitability Novelty
IP
Va
lue
Competitive
Concept
Risk Taking
Risk Taking
it
of
Pr
Pioneers Early Early Late Late
followers Majority Followers Time
Majority

37. Trade Offs between Early and Late Entry
High First Mover Advantage Low
Early Entry Late Entry
Cost Advantage
Technology Advantage
Behavioural Advantage
Pre-emptive Advantage
Low Information High

38. Igor Ansoff
Corporate Strategy

40. Ansoff

42. Red Ocean Verses Blue Ocean Strategy
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space Create uncontested market space
Beat the competition Make the competition irrelevant
Exploit existing demand Create and capture new demand
Make the value-cost trade-off Break the value cost trade off
Align the whole system of a firm’s activities Align the whole system of a firm’s activities
with its strategic choice of differentiation or in pursuit of differentiation and low cost
low cost

43. The Six Principals of Blue Ocean Strategy
Risk factor for each principal
Formulation Principals
Reconstruct market boundaries Lower search risk
Focus on the big picture, not the numbers Lower planning risk
Reach beyond existing demand Lower scale risk
Get the strategic sequence right Lower business model risk
Risk factor for each principal
Execution Principals
Lower organisation risks
Lower management risks
Overcome key organisational hurdles
Build execution into strategy

44. The Four Actions Framework • Which of the factors that the industry
Takes for granted can be eliminated
Reduce • Which should be reduced below the
Which factors should The industries standard
be reduced well • Which should be raised above the
below the industry’s Industry’s standard
standard? • Which should be created that the
Industry has never offered
Create
Eliminate Which factors should
Which factors that A New Value
be created that the
the industry takes for Curve
industry has never
granted should be offered?
eliminated?
Raise
Which factors should
be raised well above
industry’s standards?

45. From Head to Head Competition to Blue Ocean Strategy
Head to head Blue Ocean Strategy
Competition
Industry Focus on rivals within the industry Looks across alternative industries
Strategic Group Focuses on competitive position Looks across strategic groups within
within the strategic group industry
Buyer group Focuses on maximising the value Redefines the industry buyers group
of product and service offerings
within the bounds of the industry
Scope of product Focuses on maximising the value Looks across complementary product
of product and service offerings and service offerings
or service offered within the bounds of the industry
Functional- Focuses on improving price Rethinks the functional-emotional
performance within the functional- orientation of the industry
emotional emotional orientation of the
orientation industry
Time Focuses on adapting to external Participates in shaping external trends
trends as they occur over time

46. The Four Steps in Visualising Strategy
1. Visual 2. Visual 3. Visual Strategy 4. Visual
Awakening Exploration Fair Communication
• Compare your •Go into the filed to •Draw your “to be” •Distribute your before
business with your explore the six paths to strategy canvas based and after strategic
competitors by drawing creating blue oceans on insights from field profiles on one page for
your “as is” strategy •Observe the distinctive observations easy comparison
canvas advantages of •Get feedback on •Support only those
•See where your alternative products alternative strategy projects and
strategy needs to and services canvases from operational moves that
change •See which factors you customers, competitors allow your company to
should eliminate, customers and close the gaps to
create or change noncustomers actualise the new
•Use feedback to build strategy
the best “to be” future
strategy

47. Buyer Utility
The Blue Ocean Is there exceptional buyer
utility in your business idea?
Strategy
Sequence No rethink
Yes
Price
Is your price easily
accessible to the mass
of buyers?
No rethink
Yes
Cost
Can you attain your
cost target to profit
your strategic price?
No rethink
Yes
Price
What are the adoption
Hurdles in actualising your
business idea?
Are you addressing
them up front? No rethink
Yes
Commercially Viable
Blue Ocean Idea

48. The Buyer Experience Cycle
Purchase Delivery Use Supplements Maintenance Disposal
How long does it How long does it Does the product Do you need Does the product Does use of the
take to find the take to get a require training other products require external product create
product you product or expert and services to maintenance? waste items?
need? delivered? assistance? make the product
work? How easy is it to How easy is it to
Is the price of the How difficult is it Is the product upgrade and dispose of the
purchase to unpack and easy to store How costly are maintain the product?
attractive and install the new when not in use? they? product?
accessible? product? Are there any
How effective are How much time How costly is legal or
Hw secure is the Do buyers have the product’s do they take? maintenance? environmental
transaction to arrange features and issues in
environment? delivery functions? How much pain disposing of the
How rapidly can themselves? If product safely?
do they cause?
you make a yes, how costly Does the product
purchase? and difficult is or service deliver How costly is
this? far more power disposal?
or options than
required by the
average
consumer? Is it
overcharged with
bells and
whistles?

49. Guerilla Strategy

50. Guerilla Marketing Strategy
• Levinson identifies the following principles as the foundation of guerrilla marketing:
• Guerrilla Marketing is specifically geared for the small business and entrepreneur.
• It should be based on human psychology instead of experience, judgment, and
guesswork.
• Instead of money, the primary investments of marketing should be time, energy, and
imagination.
• The primary statistic to measure your business is the amount of profits, not sales.
• The marketer should also concentrate on how many new relationships are made each
month.
• Create a standard of excellence with an acute focus instead of trying to diversify by
offering too many diverse products and services.
• Instead of concentrating on getting new customers, aim for more referrals, more
transactions with existing customers, and larger transactions.
• Forget about the competition and concentrate more on cooperating with other
businesses.
• Guerrilla Marketers should always use a combination of marketing methods for a
campaign.
• Use current technology as a tool to empower your marketing.
Source Levinson, Jay Conrad and Goodin, Seth. The Guerrilla Marketing Handbook. Boston: Houghton Mifflin
Company, 1994

51. Guerilla Activity Components Evaluation
Questions Feature Evaluation
How well is the dealer or distributor known? A company must work with a seasoned dealer or
distributor
How good is the dealer or distributor for entry? A company must enter a particular target market
effectively
A company must penetrate the market as deeply
How powerful is the dealer or distributor in
as possible
penetrating the market?
Can the dealer or distributor focus on the A company needs a concentrated effort from the
dealer or distributor in order to enter the market
products and provide the necessary attention?
and succeed
Can the dealer or distributor change orientation, if
necessary, to accommodate unexpected changes The dealer or distributor must be flexible enough
to help a company to cope with changes in the
in the market?
market
A company must expect loyalty from the dealer or
What level of loyalty can be expected from the distributor – that the dealer or distributor will not
dealer or distributor? abandon the partnership

52. Viral Marketing

54. • BusinessWeek (2001) described web-based campaigns for Hotmail (1996)
and The Blair Witch Project (1999) as striking examples of viral marketing,
but warned of some dangers for imitation marketers.
• Burger King's The Subservient Chicken campaign was cited in Wired as a
striking example of viral or word-of-mouth marketing.
• In 2000, Slate described TiVo's unpublicized gambit of giving free TiVo's to
web-savvy enthusiasts to create "viral" word of mouth, pointing out that a
viral campaign differs from a publicity stunt.
• Cadbury's Dairy Milk 2007 Gorilla advert was heavily popularised on
YouTube and Facebook.
• With the emergence of Web 2.0, mostly all web startups like facebook.com,
youtube.com, collabotrade.com, myspace.com, and digg.com have made
good use of Viral Marketing by merging it with the social networking.
• The release of the 2007 album Year Zero by Nine Inch Nails involved a viral
marketing campaign, including the band leaving USB drives at concerts
during NIN's 2007 European Tour. This was followed up with a series of
interlinked websites revealing clues and information about the dystopian
future in which the album is set.
• The film Cloverfield initially released one teaser trailer that did not reveal the
title--only the release date. The subsequent online viral marketing campaign
for the film is remarkably complex, making use of everything from fictitious
company websites to MySpace profiles for the film's main characters.
• In 2007, World Wrestling Entertainment promoted the return of Chris Jericho
with a viral marketing campaign using 15-second cryptic binary code videos.
The videos contained hidden messages and biblical links hinting Jericho's
return and were shown interrupting WWE broadcasts.[11]

55. Acquisitions

56. Acquisition Framework
Acquisition Acquisition Acquisition Acquisition
Drivers Strategy Pricing Implementation
Objectives Bidding Wars Organisation structure
External Drivers Reservation Price Culture
Negotiation Incentives
Political Value Creation Pace
Shares/Cash
Economic Vertical Integration Regulations
Industry Industry consolidation Objectives
Technology Excess resources
Internal Drivers
Strategic
Managerial
Financial

57. Successful and Unsuccessful Acquirers
Acquisition Integration Issue Successful Acquirer Unsuccessful Acquirer
Integration Speed and Uses integration terms to Does not use integration terms.
Decision Making integrate rapidly, usually within Merge at slow rates. Layoffs
3 months. Layoffs and other and other decisions deferred.
painful measures are
undertaken quickly
Communication and Vision Communicate the new vision to Does not establish a new vision
acquired employees or new roles immediately.
immediately with a clear Minimizes communication
definition of new roles efforts with acquired firm so not
to over burden new employees.
Networking and Socialisation Uses networking and Does not over actively network
socialisation to discover new or socialise with employees in
opportunities in the acquisition. the acquired firm.
Who is in charge? Keeps the acquired firm’s senior Keeps all the acquired firm’s
managers, but only if they agree senior managers through a
with the vision of the acquired variety of fiscal and non-fiscal
company post-acquisition incentives
Integration Approach Integrates the acquired firm as Adopts a flexible policy to
a business unit in its own right, integrate offering each acquired
but with a tightly defined company a unique structure as
functional role. part of the acquired firm

58. Michael E. Porter
Cluster Analysis, Value Chains
& Competitive Strategy

59. Three Generic Strategies
Strategic Advantage
Uniqueness Perceived
Low Cost Position
By Consumer
Overall
Industrywide Differentiation Cost
Strategic Target
Leadership
Particular
Segment
Only
Focus

60. What drives a competitor?
Competitor Analysis
What the competitor is doing
Future Goals and can do
At all levels of management
And in multiple dimensions Current Strategy
How the business is
currently competing
Competitor Response Profile
Is the competitor satisfied
with its current position?
What likely moves or strategy
shifts will the competitor take?
Where is the competitor vulnerable?
What will provoke the greatest and
most effective retaliation by the competitor?
Assumptions Capabilities
Held about itself Both strengths
and the industry and weaknesses
Porter, Competitive Strategy, P. 49

61. New Market
Entrants, eg:
• geographical
factors
• incumbents
resistance
• new entrant strategy
• routes to market
Buyer Power, Competitive Rivalry, Supplier Power, eg:
eg: eg: • brand reputation
• buyer choice • number and size of • geographical
• buyers firms coverage
Figure 7. Porter’s Five Forces of Competitive Position
size/number • industry size and • product/service level quality
• change cost/frequency trends • relationships with
• product/service • fixed v variable cost bases customers
importance • product/service ranges • bidding
• volumes, JIT • differentiation, strategy processes/capabilities
scheduling
Product/Technolog
y
Development,
eg:
• alternatives price/
quality
• market
distribution changes
• fashion and trends
• legislative effects

62. Threat of New Entrants
Threat of competition from Porter’s Five Force
new technology Analysis for Gernaiol
(in past from petrochemicals)
Industry
Bargaining Power competitiveness Bargaining power of
Of suppliers buyers
Intensity of rivalry
Restrictions on Concentration of
The supply of usage into few major
beta-pinene compounders
The required strengthen buyer
feedstock power
Other producers of
geraniol
Adapted from Porter,
M. E, Competitive
Advantage: Creating
and Sustaining
Threat of substitutes
Superior
Performance, New Possible reformulation with
York, Free Press,
1985
other rose materials eg.
Phenyl ethyl alcohol

63. Regulation
SCCP placed lemongrass oil
under scrutiny as a cosmetic
Trends & Technology ingredient in EU.
Alternative technologies to
Trends & Technology
steam distillation (CO2) Substitutes
can make much smoother Citral (main constituents) can
Regulation
oil but will increase capital be produced from a number of
needs greatly. chemical feed stocks.
Natural, exotic, organic, Alternative oils (litsea cubeba)
FAIRTRADE could cost much less to produce.
increase oils popularity (?) Lemon myrtle oil much
if seen as exotic. smoother and acceptable to
end users
Many alternatives to
lemongrass in product
formulations.
Substitutes
Industry Competitors
Bargaining
Bargaining power of
power of buyers
suppliers
Intensity of Rivalry
Competitive
Rivalries Bargaining Power of Buyers
Currently small item of trade in
flavour industry, strong
relationships with established
producers.
Bargaining Power of Suppliers
Collecting the most suitable Competitive Rivalries
planting material require effort. Lemongrass quick yield and
Extraction and straightforward to cultivate and distil
harvest .technology needs to be – expect high elasticity of supply
acquired or developed from both existing and new
Analytical equipment or service producers.
maybe expensive/remote. Producers of substitutes very
aggressive

64. Role & Reach of SAIP
Role & Reach of SAIP
Industry Phase development of SAIP
HIGH
MARINE
III SNP
VALUE ADVANTAGE
VALUE ADVANTAGE
VALUE ADVANTAGE
VALUE ADVANTAGE
FRUITS
FLOWERS
I
LIVESTOCK
II
VEGETABLES
LOW
LOW HIGH
PRODUCTIVITY ADVANTAGE
Phasing of SAIP in order to ensure a clear focus and fast cluster development!
Depending on Logistics Infrastructure Scenario SAIP could provide a wider reach ->
Starting with only a 100 km radius to entire Sabah!

65. The Value Chain