Nutrition: Regional Expansion Strategy
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.0 EAC NUTRITION: REGIONAL EXPANSION STRATEGY
Introduction
This case is about the strategic marketing plans which East Asiatic company (EAC) wish to implement to increase its market share either by expanding geographically in China market, penetrating new market in India or introduce new product lines. This strategic marketing plans was necessitated when investors were waried of the intense competition in the Asian market which resulted in the undervalue of the stock market price. The only market that remained strong was the Chinese market. EACs product lines are milk powder products for infants which are; Dumex, Plus, Mamex, Mamil.
As stated, the three possibility of this “growth strategy are:
1. To expand geographically in China
2. To enter Indias new market
3. To introduce new products in the existing markets in order to be able to evaluate the situation, there may be presented some notes like
-EAC Nutrition
-Competitors
-Target markets
EAC Nutrition
We have seen from the history outline that EAC nutrition, mainly due for its steady increase, has been consider one of the core business of the company. Some additional data: 1953 Launch of the first milk product in Asia, 1970 Expansion of the offer to three brands,
a) DUMEX (targeted as mid-price segment)
b) MAMEX (targeted as premium brand)
c) MAMIL(targeted as premium brand)
The market segments were two separate categories: IFFO (Infant formulas and follow up) for children up to 2 years and GUM (growing up milk) for year from one year and older. Both product lines (IFFO and GUM) were had a vitamin and nutrients addition, products were customized to local tastes
a) Thai market required a sweeter taste (for example honey)
b) Chinese market tended to prefer unflavoured taste
In 2000 EAC become the first milk producer to introduce U.H.T. milk in Thailand and Malaysia UHT milk was market under the DUMEX brand and targeted children of three years and older, in Thailand UHT, milk was produce locally in a plant leased by EAC, which allowed EAC to enter the market without big investments. co packing in Thailand was arranged with a third party, 90% of sales were generated in the core markets of Malaysia, China and Thailand 30% of market share in Malaysia and Thailand.
Growth in Malaysia was driven by GUM products, IFFO sales were flat, EAC products were available in 200 Chinese cities (Eastern and Western regions primarily), 30 % of market share in Western China Similarities between Malaysia and Thailand countries enabled EAC to establish a strong brand name and a strong market presence. Malaysias GDP grew to 8% in 2000, but inability to float the currency could deter foreign investments in the long term, Thailand experienced too the Asian crisis of 1997, but was recovering slowly, China had not been affected by the crisis and showed a yearly 7% increase of growth in excess since 1997. EAC nutrition operated also in other countries, such as: Singapore, The Philippines, Vietnam Cambodia, Brunei, The Middle East, Russia.
1.2 What are the economics of the infant nutrition industry? What capabilities do firm need to succeed in this industry?
It is known that food and nutrition (children nutrition) is one of the leading aspects on world economy with its average purchasing power as compared to other sectors of the economy. Every human irrespective of their status can coin this from the fact that food and nutrition represent the base of Maslow’s hierarchy of needs and it is sort for. The infant nutrition in itself is a lucrative industry that is increasingly expanding due to technological intervention of lower infant mortality rate and an increasing of women in the labour market as shows in the case study exhibit 2.
It can also be mention that despite the increasing education of the importance of breast milk for infants, some non-working mothers and especially working mothers supplement their infant feed with other nutrition other than the natural breast milk making a demand for infant nutrition to increase thereby increase the sales of manufacturers. This is also due to the limitation of dairy industry, which supplied limited cow milk, and a large proportion of arable land used for family. Milk power were preferred over because they did not require refrigeration, as they were stored well in tropical weather. More to this was also the value, which Asian parents placed on infant nutrition because a child was seen as the most important aspect of a family, hence families in Asia spent the much they could on their children nutrition. Since the infant nutrition is often highly demanded, a high the sales volume was record as seen in exhibit 4; the infant nutrition industry could be say to be very economical to invest.
A firm, which does need to succeed in this field, has to have following capabilities:
Trusted brand: Infant nutrition industry players build a reputable brand over the years so that the demand for their products will be higher than other competition. However, brand is not the sole attraction to the demands by most consumers, but a trusted brand is perceive to be the reason why most consumers prefer one infant nutrition to another. especially first time mothers who do not have specific product knowledge of baby nutrition, relied on trusted brands and advice from professionals like Doctors, Paediatrician, Nurses, midwives and most especially their mothers, or friends.
Good relation with medical field: The brands who always had a good relationship with medical professionals used this relationship to attract consumers through the advice from professionals like Doctors, Paediatrician, Nurses, and midwives. Other reason to be a selected brand by a consumer among brands is to leverage on medical field specialist image among consumers as stated in the analysis about Mead Johnson. Parents who perceive the medically allied products tend to take advantage of this to select such brands over others.
Active participation in health care events: The active participation by certain brands in health related events like child nutrition and development in conjunction with hospital and public health nutrition for mental