January 10th, 2018
The internal environment influencing Sorbet Delicacies expansion
Sorbet Delicacies has been a market leader in the ice cream business in the U.S. in the present past. The company has been in existence for the last 10 years and after the initial 5 years following its establishment its performance has been noted to improve. Not only has it recorded big profit margins in the last five years but has also increased its domestic sales channels to into every U.S. state. Such expansion has helped it achieve an optimum consumer reach in the U.S. market, a fact that has further expanded its sales volumes. The growth of the company could also be attributed to the quality of service they offer which has helped them generate and sustain a considerable consumer loyalty. The financial turmoil and increasing competition from other market players such as Pierre’s Ice Cream Company and Cold Stone Creameries have however necessitated the company to consider expanding into the global markets with Japan being proposed as the most likely candidate. The company’s management is of the view that such an expansion does not only have the potential of creating a massive demand for the ice creams but also reduces the adverse effects that arise from country specific macro economics. This has been informed by the fact that Japan’s ice cream market generates substantial amount (25.9%) of the entire Asia – Pacific (Australia, China, Japan, India, Singapore, South Korea and Taiwan) ice cream revenue (Datamonitor, 2008) and that the country possesses distribution channels into which sorbet delicacies can tap.
For successful entry into the market the company has assessed its internal environment. The strengths of sorbet delicacies lie mainly in the learned experience through domestic expansions. Following the expansion in the domestic market the company has already put in place a steering committee comprised of representatives from various departments which is charged with coordinating the expansion ventures. The company also boasts of highly qualified managerial team that has overseen the growth of the company from a single establishment to agglomerate comprised of multiple departments distributed across the United States. The company however faces weaknesses in having little direct information on Japan’s market since it has never operated in that market. Further due to its domestic nature the cultural diversity in the company’s workforce is devoid of Japanese employees who could have proved helpful during the transition. To cater for these challenges the company has embarked on extensive planning and research to ensure the success of the expansion.
The clamor to tap into the Japanese ice cream market has resulted in a number of planning activities. The core activity was the re-evaluation of the proposed expansion in respect to meeting the overall objectives of Sorbet Delicacies. These objectives include profit maximization, improving and sustaining the performance, gaining a competitive edge over the domestic competitors and reducing market specific risk via spreading such between the domestic and international market. This evaluation was done in view of the comparable efficiency of the project in relation to the cost and period of implementation. The company has thus identified the major tasks that will be involved in the expansion process and subsequent operations. These include marketing activities aimed at both distributors (supermarkets) and retailers of the products as well as capital investments to provide for transportation and production in later stages. A timeline to guide the expansion activities and a supporting budget for these have been laid out in view of the proposed entry mode that the company wishes to follow. It has been proposed that an increasing commitment mode of entry would be more appropriate due to the existence of established market players in Japan’s ice cream industry.
The organizing function has mainly been through a steering committee. The committee comprises a representative from each of the departments – mainly the managers, but with the option of delegation. This has been necessitated by the number of departments that play an active role in the expansion plans. Though the expansion proposal had initially been the brain child of the research and development department, other departments such as finance and marketing have subsequently been incorporated. The finance department has for example been charged with the responsibility of formulating a budget for the expansion activities while the marketing department is developing the appropriate marketing mix strategies that will be employed in building a considerable market for the products. Further external expatriates are occasionally invited to give technical guidance on the areas that the company’s resources are deficient in. Such has been the basis for the formation of a steering committee. The committee meets twice every week with a third meeting at the end of the market designed to inform the management of the progress of the expansion program. The involvement of various departments has also necessitated the formulation of information flow procedures between the employees of these departments and at times with the external expatriates where the latter are involved. This has been developed to prevent leakage of important information prior to the company’s expansion while allowing important information necessary for activities to proceed per the timeline to be effectively disseminated. Such organization has also catered for resource allocation for each department involved with the expansion plan to ensure that the laid out timeline is followed and an opportune market entry time is not compromised.
The implementation phase would be based on an increasing commitment pattern. The increasing commitment has been identified after available information showed that the Japanese ice cream market already consisted of established domestic players who enjoys relatively high market share (Datamonitor, 2008). The initial implementation would thus involve the sales and marketing departments with exports being the main mode of operation. Subsequent development would be followed on careful analysis of the market performance of the products. The company however wishes to engage a local manufacturer in a joint venture in future with the aim of full acquisition of such a local manufacturer once the market share has been assured. To ensure these events are more likely, the company through the marketing department intends to follow an aggressive marketing strategy that embodies all the elements of the marketing mix (product, price, promotion, and place). Go to part 3 here.