assignment draft_ima

BOLTON BUSINESS SCHOOL

Course level: MBA

Module title: International Marketing Management

Module code: IMA 7001

Level HE7

Credits 20

Assignment title: Strategic Global Marketing Plan Date issued Date due

in Extension date agreed? Actual submission date

25th June 2016 12th August 2016

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Student Signature: Saad Amin Date: 6th August 2016

Student No. 1510862/1 Date: 06-Aug-2016

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International Marketing Management – IMA

7001

Contents Introduction ........................................................................................................................................................................... 2

Main Body ............................................................................................................................................................................. 2

International Marketing: A Global Phenomena ................................................................................................................ 2

Al Fakher Tobacco Company: An Overview ...................................................................................................................... 3

Tanzania: A Prospective Global Emerging Market ............................................................................................................ 3

The Business Environment ................................................................................................................................................ 3

The Microeconomic (Internal) Environment: Brief SWOT Analysis Overview .............................................................. 3

The Macroeconomic (External) Environment: External Analysis .................................................................................. 4

A. PESTEL Analysis...................................................................................................................................................... 4

B. CAGE Analysis ........................................................................................................................................................ 7

The Shisha Flavour Industry: Assessing the competition .................................................................................................. 9

Management Orientation: ERPG framework .................................................................................................................. 11

Mode of Entry in the Tanzanian Market ......................................................................................................................... 11

Marketing Objectives ...................................................................................................................................................... 13

Market Segmentation, Targeting and Positioning .......................................................................................................... 14

Product ............................................................................................................................................................................ 14

Price ................................................................................................................................................................................. 17

Place ................................................................................................................................................................................ 19

Promotion ........................................................................................................................................................................ 20

Issues, Problems and Risks: Critical Analysis and recommendations ............................................................................. 23

Conclusion ....................................................................................................................................................................... 25

Reference List ...................................................................................................................................................................... 26


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Introduction

In today’s globalized world, organizations seek to enter newer markets across borders to achieve

higher growth and broaden their scope. To ensure a successful expansion strategy, firms need to build

a constructive and comprehensive market expansion plan which covers various elements. This report

provides market expansion plan for Al Fakher in Tanzania. Internal and External Analysis of the

business environment have been conducted using SWOT, PESTEL and CAGE Analysis. The

competitiveness of the market has been evaluated using Porter’s five factor model. Based on the

results of these analyses, a thorough plan is outlined on how the organization would enter the market

and use the 4Ps of marketing to achieve its marketing objectives. The issues and risks that Al Fakher

may face while exploiting the market are also discussed with recommendations on how to mitigate

them.

Main Body

International Marketing: A Global Phenomena

The significant improvement in technology, communication, transportation and mobilization of capital

has led to immense globalization over the years. Companies around the world are now competing in

a single integrated global market where intense competition requires companies to effectively market

their products and services to survive, grow and gain competitive advantage. It is therefore important

for organizations to fully understand the significance of marketing and its relation with globalization.

The term marketing can be described as set of activities, processes and methods used for developing,

delivering and communicating products or services to satisfy the customers, society and other related

stakeholders (American Marketing Association cited in Palmer, 2012).

As companies aim to expand their scope of operations beyond the boundaries of their home countries,

their marketing strategies should reflect the global perspective. Therefore, it is essential for

organizations to adopt global marketing strategies to explore new markets, segments, niches and

business opportunities around the world (Lamont cited in Svensson, 2002). An effective adoption of

global marketing strategies will enhance the overall position of the organization through lower costs,

larger customer base, greater industry knowledge and improved scope of business operations. The

following market expansion report will use these global marketing strategies to expand the business

operations of Al Fakher Tobacco Company in Tanzania together with a market entry and expansion

plan.


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Al Fakher Tobacco Company: An Overview

Established in 1999, Al Fakher Tobacco Company has been operating in United Arab Emirates with

the vision to create a rich shisha smoking experience for the customers. The company’s domain mainly

consists of range of shisha flavours that are made out of molasses by combining fine tobacco and

exquisite regional flavours. With its headquarter established in Ajman (UAE), the company has been

operating in 49 different countries around the world with large concentration in Middle East, Europe

and North America (Al Fakher, 2014). As one of the leading shisha flavour producing companies, Al

Fakher has the potential to further expand its operations in other parts of the world, where the trend of

smoking shisha is on the rise. Among many available options to consider, Al Fakher needs to ensure

it opts for the region that maximizes the value of the organization and improves the brand image.

Tanzania: A Prospective Global Emerging Market

Tanzania has been identified as a potential market that can be considered by Al Fakher to expand its

operations. Located on the eastern belt of Africa, Tanzania is a country that provides greater

opportunities to foreign investors. With Al Fakher having minute presence in Africa, Tanzania can

provide great opportunity to capture the larger African market using its sea ports and road network.

The following sections will provide a detailed international marketing plan of Al Fakher’s expansion in

Tanzania.

The Business Environment

It is essential for the organization to effectively analyse the overall business environment before

expanding their business operations in a particular region. Aquinas (2009) described the environment

as set of forces that revolves around the organization and has an impact on the way it operates. Al

Fakher needs to assess the environment of Tanzania to determine factors that may affect the business

in future.

The Microeconomic (Internal) Environment: Brief SWOT Analysis Overview

The SWOT Analysis can help Al Fakher to explore how it will position itself in the expanding market

by using its strengths to overcome the competitive forces (Porter cited in West et al., 2015). This has

been shown in figure 1 below:


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The Macroeconomic (External) Environment: External Analysis

It is important for organization to examine the macroeconomic environment before making strategic

decisions using external analysis techniques. Ungson and Wong (2014) argued that appraisal of the

external environment is essential to analyse the potential of international market opportunities.

PESTLE and CAGE Analyses have been used to gauge the external business environment of

Tanzania as a potential market of entry for Al Fakher.

A. PESTEL Analysis

This analysis tool is used to study the Political, Socio-cultural, Technological, Environmental and Legal

aspects of the business environment. Dincer (cited in Yuksel, 2012) highlighted that PESTEL analysis

helps organizations to gather adequate information to predict situations and circumstances that it may

encounter in future. Therefore, it is essential for Al Fakher to conduct a detailed PESTEL Analysis to

assess Tanzania’s external business environment.

Strengths Weaknesses

S WOpportunities Threats

O T

Inte

rnal

Exte

rnal

Figure 1: Al Fakher's SWOT Analysis for Expansion in Tanzania

• One of the Market Leaders in the Shisha Flavor Industry

• Experienced Management as it operates in 49 different countries

• Reasonably strong finance position of the organization

• Good reputable Brand Image

• Limited Advertisement due to regulations in other parts of the world

• Specialization in one product means competitors offering other products like Cigarette may have advantage over them

• Through Tanzania, larger market of Africa can be captured i.e. neighboring African Nations

• Increase in Demand as Shisha has become a social sensation

• Limited Competition• Further points are covered in PESTEL

& CAGE Analyses

• Main competitor, Nakhla, may also want to enter

• Environment Laws may get strict in future

• 18% Tax Rate of Shisha Products (Water Pipe)

• Fewer Banks Available• Expensive Infrastructure


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Impact on

Al Fakher

Favorable

1 Tanzania has been a more stable economy compared to other neighboring countries Favorable

2Political landscape consist two major political parties in a democratic setup which have maintained favorable

business environmentFavorable

3 Weak controls and enforcement of tobacco laws Favorable

4 Good Relations with the West Favorable

5 Government policies encourages foreign investment Favorable

6 High Level of Corruption Unfavorable

Favorable

1 Three major ports along the Indian Ocean Favorable

2 Main access route to African Market Favorable

3 Availability of Cheap Labor Favorable

4 Tanzania has been an attractive tourist hub Favorable

5 Investment Incentives by Government Favorable

6 Lack of access to Credit due to fewer banks Unfavorable

7 High cost of electricity and Infrastructure Unfavorable

Favorable

1 A mixture of Bantu, Arab and Western cultures Favorable

2 Although a multilingual country, English is can be used as means of communication Favorable

3 Less violence on basis of ethnicity and religion Favorable

4 Low Levels of Stress and Anxiety Favorable

5 Higher percentage of population between the age of 15 and 65 Favorable

6 Higher Income Inequality Unfavorable

7 Low levels of education Unfavorable

Negative

1 Lack of modern technology in the country Unfavorable

2 Lack of investment in technology by Govt Unfavorable

3 Much behind the neighboring countries in terms of technology Unfavorable

Favorable

1 Lack of comprehensive Environmental Laws Favorable

2 Poor implementation of existing environmental regulation Favorable

Negative

1 Sales Tax of 18% on Water Pipe (Shisha related Products) Unfavorable

2 High level of irregularities in licensing and registration of businesses Unfavorable

3 High level of corruption means the legal system is flawed and ineffective Unfavorable

4 Lack of Company protections laws Unfavorable

Figure 2: Showing Tanzania's PESTEL Analysis

Legal Factors

Factors

Political Factors

Economic Factors

Socio-Cultural Factors

Technological Factors

Environmental Factors


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The table above (figure 2) shows the results of PESTEL analysis of Tanzania with respect to

marketing. The political, economic, social and environmental environments are favourable for carrying

out shisha flavour business in Tanzania whereas technological and legal environment are

unfavourable for Al Fakher. A stable African nation with a democratic government setup involving two

major political parties, Tanzania is a region with steady political environment. Wall and Rees (2004)

argued that a stable political system improves the market dynamics of a region which can attract

investments. The country’s strong ties with the western part of the world together with investment

encouraging government policies make the region more desirable to conduct business. Al Fakher can

also make good use of weak controls and enforcement of tobacco laws to penetrate the shisha flavour

market which also covers the environmental factors of the external environment. However, higher level

of corruption makes the entrance in the region slightly unfavourable for Al Fakher. Daniels et al. (2015)

explains that in such regions government members seek their own interests and often create hurdles

for foreign companies to enter.

Tanzania boasts three major African ports of Dar es Salaam, Mtwara and Tanga which have been the

important access routes to the African continent. Al Fakhir can make use to these three ports to trade

their products not only in Africa but also to other untapped markets. The region is also lucrative in

terms of investment incentives and access to cheap labour. Musiba (2013) highlighted that Tanzania

offers well balanced financial incentives to investors and trainable skilled labours at significantly low

cost. These economic and financial factors are favourable for companies like Al Fakher to expand in

this region. However, there are certain difficulties that the company may encounter which include lack

of access to credit due to fewer banks and higher cost of electricity and infrastructure in Tanzania.

In terms of socio-cultural aspect, the country could provide a favourable environment. The

convenience of using English as a means of communication provides an advantage for Al Fakher to

operate. 52% of the total population age between 15 to 64 years (National Bureau of Statistics, 2013)

which makes Tanzania a suitable market for selling shisha flavours as target customers fall in this age

category. Higher income inequality and lack of quality education are the negative factors that have to

be considered by Al Fakher.

The technological and legal environments of Tanzania are very unfavourable for Al Fakher. The

country lacks technological drive and past initiatives to promote advancement has been in vain. World

Bank (2010) highlighted the lack of capacity of the legal system in Tanzania to formulate a regulatory

reform strategy. High levels of bureaucracy, corruption in legal systems, lack of company protection


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laws, 18% tax on Shish products and irregularities in licensing of businesses will affect Al Fakher’s

business operations.

B. CAGE Analysis

The CAGE analysis comprises of Cultural, Administrative, Geographic and Economic differences

between countries or region that can be very useful for organization constructing international

strategies (Ghemawat, 2013).


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The CAGE Analysis of Tanzania compared to Al Fakher’s country of origin UAE (figure 3) gives a clear

picture of differences and similarities between the regions. The two countries are culturally similar in a

way that they have common languages and religions. The medium of business communication is

English and Islam dominates the religion in both countries. The presence of Arabic ethnicities in

Dimension UAE Tanzania Match Source

Main Spoken Languages Arabic & English Swahili, English & Arabic Yes

Main ReligionsIslam (76%)

Christianity (9%)

Islam (35%)

Christianity (30%)Yes

Major Ethnicities

South Asian (50%)

Arabs & Iranian (23%)

Emirati (19%)

Bantu African (95%) No

Trade Blocs

Trade & Investment

Framework

Agreement (TIFA)

General Agreement

on Tariffs and Trade

(GATT)

World Trade

Organization (WTO)

Gulf Cooperation

Council (GCC)

Southern African

Development Community

(SADC)

Common Market for Eastern

and Southern Africa

(COMESA)

World Trade Organization

(WTO)

Yes

Mbendi (2016)

UAE Trade and Commercial Office

(2016)

Currency UAE Dirham Tanzanian shilling No Not Applicable

Colonial Ties None German No Central Intelligence Agency (2016)

Corruption Extremely Low Very High No Not Applicable

Political Environment Monarchy Democratic Govt. No Not Applicable

Legal OriginStrict Rules & Law

EnforcementWeak Law enforcement No Not Applicable

Physical Remoteness No TimeandDate (2016)

Common Border No Not Applicable

Land Area (sq. km) 83,600 885,800 No Central Intelligence Agency (2016)

Time Zones (Difference) GMT +4 GMT +3 Yes (1 Hour) Not Applicable

Climate Zones Very Hot/Sunny Hot/Humid Yes Not Applicable

Transportation Very Good Good Yes Not Applicable

GDP per Capita USD 67,600 USD 2,900 No Central Intelligence Agency (2016)

GDP Growth Rate 7.0% 3.9% No Central Intelligence Agency (2016)

Human Development Index 0.835 0.521 No Human Development Reports (2016)

Financial Institutions 51 40 NoCentral Bank of UAE (2016)

Bank of Tanzania (2016)

Human Resources Mostly Skilled Expats Average Skilled No Not Applicable

Infrastructure Very Developed Moderately Developed No Not Applicable

Figure 3: Showing CAGE Analysis of Tanzania (compared to Al Fakher's country of Origin UAE)

Cultural

Administrative

Geographic

Economic Factors

Central Intelligence Agency (2016)

Approx. 4000 Kilometers

None


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Tanzania, although in very little numbers, also gives an added advantage to introduce a product from

an Arabic tradition.

Both countries are known to be the hub of trade and tourism. Although UAE performs well against

Tanzania in both aspects, there is a common ground. Administratively, the only match is the fact that

both countries are part of various trade blocs. Tanzania is an important member of Common Market

for Eastern and Southern Africa (COMESA) which is a large trading partner of UAE (Arnold, 2013).

The other administrative aspects including currencies, colonial ties, level of corruption, legal strictness

and political environment are vastly different for the two countries.

The geographic distance between the two countries is reasonable. Although the two countries are

approximately 4000 kilometres apart, there are many similarities among them. There is merely one-

hour time difference between the two regions. The climate of both the regions is usually hot and these

two countries have good transportation networks. However, Tanzania is huge in size compared to a

smaller land size of UAE.

The economic distance between the two countries is very high. UAE is far more developed with high

Gross Domestic Product (GDP) and Human Development Index (HDI). Ahmed (2015) considers UAE

to be one of the richest countries of Middle East which has successfully adopted diversification of the

economy. Tanzania, on the other hand, is still considered a developing economy with lower GDP and

HDI. UAE is far more developed in terms of financial institutions, human resources and infrastructure.

The CAGE analysis shows that the cultural and geographical distance between the two countries is

less whereas the economic and administrative distance is quite high. Olusegun (2014) concluded that

the framework is beneficial to organization as is helps to determine the differences that are required

to consider in deciding where to compete.

The Shisha Flavour Industry: Assessing the competition

The global shisha flavour industry consists of a mix of many producers. As most of these companies

are focusing in growing in other regions, two brands may have their attention on the African Market:

Nakhla and Afzal. The main reason for these two brands to be direct potential rivals of Al Fakher is the

fact that they sell products in a similar price range and have greater presence around the world.

Presently, Nakhla and Afzal have official distributers in South Africa (same as Al Fakher) through which

they supply the shisha flavours in most parts of Africa. Since Tanzania seems to be an attractive


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market for expansion, Al Fakher should be watchful as competitors might also want to exploit the

benefits of the region.

Porter’s Five Factor model has been used to consider the horizontal and vertical competition factors

that may affect Al Fakher business operations in Tanzania. This five factor model is useful in

determining the market attractiveness and intensity of competition for organization to understand the

dynamics of the industry (Porter, 2004). The result of the model shows that the industry is favourable

in terms of competition for Al Fakher (Figure 3).

No. Factors Description Magnitude

1 Threat of New Entry

- High cost of entry

- Competitors already have established

Brand Image

Favorable

2 Threat of Substitute

- Many substitutes like Cigarette, E-

Cigarette, Cigar etc.

- Big threat to the industry as a whole

Unfavorable

3 Bargaining power of Buyers

- High price sensitivity

- Switching Cost is low

- Shisha Flavors are usually similar

Unfavorable

4 Bargaining power of Suppliers

- Raw materials is in good supply and

therefore suppliers don't pose a greater

threat

Favorable

5 Competitive Rivalry

- Tanzania is still untapped market

- Few major competitors in form of

Nakhla and Afzal

- Low exit barriers

Favorable

The Five Forces Model of Competition

Figure 4: Showing Al Fakher's Five Factor Model of Competition


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Management Orientation: ERPG framework

After comprehensive analysis of the business environment, it is essential to understand the company’s

management orientation before deciding the market entry mode. This can be achieved by using ERPG

framework which has proven to be beneficial for multinational organisational development and the way

organization perceives the international market (Shoham et al. cited in Sandberg and Hansén, 2004).

The four orientations outlined in the framework (ethnocentric, polycentric, regiocentric and geocentric)

describe a company’s beliefs about the nature of the world (Figure 5).

Covering over 49 countries to sell its products using an appropriate blend of adaptation and

standardization in its marketing strategies, Al Fakher is said to have a geocentric orientation. Like most

geocentric oriented organizations, Al Fakher operates mainly from its headquarters in UAE. Since the

product and concept of shisha remain mostly consistent throughout the world, Al Fakher varies its

product niche market according to the region. For example, in South Asia the shisha flavours are

marketed to young consumers as a social trend where as in Middle East it is marketed as a cultural

norm to a wider audience. In Europe and North America, shisha has been associated with night clubs

and bars (Glogan, 2013). Therefore, a standardized product has been marketed with localized

elements by Al Fakher. Keegan and Green (2016) concluded that organizations with geocentric

orientation consider world as a potential market and develops integrated global strategies to cater

demand for their products and services.

Mode of Entry in the Tanzanian Market

Management Orientation Description

Ethnocentric

Company assumes that products and way of business

operations that was successfully used in home country will

be applicable everywhere

PolycentricCompany assumes each country is different and a unique

strategy would be required to succeed

Regiocentric Company views world as combination of various regions and

assumes a unique strategy is applicable for each region.

GeocentricCompany views the world as a potential market and uses

global marketing strategy to successfully exploit the market.

Figure 5: EPRG Framework - Four Types of Management Orientation


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As clear understanding has been established regarding the management orientation of Al Fakher, it is

important for the organization to assess various modes of entering the Tanzanian market. Entry mode

choice is highly dependent on the vision and risk appetite of the organization as it may consume

substantial resources. Rhee (2008) emphasized that entry mode choice is highly critical part of

expansion strategy for firms competing in unfamiliar environment as is determines the level of resource

commitment. Al Fakher can assess two wider categorization of entry mode choices: trade-related and

investment related (Figure 6). Each entry mode choice has its own advantages and disadvantages

and therefore, Al Fakher needs to consider one which matches its business plans and is aligned with

its overall global strategy.

Al Fakher has consistently used licensing as an effective strategy to expand globally in the past using

authorized distributors as a means to spread its product in the local markets. The same strategy has

been common among many other shisha flavour producers with the exception of Nakhlah. In certain

regions Nakhlah, one of the main competitor of Al Fakher, has merged with local tobacco companies

to penetrate the market.

Since Al Fakher has been successful and experienced in licensing as a form of international expansion

technique, it could benefit from it by applying the same form of entry in Tanzania. The purchase of

license by a local distributor in Tanzania would give them the sole right to sell the product in that

particular market. Al Fakher, being the licensor, can earn royalties, license fees or any other form of

compensation in exchange for allowing the distributing company to use its brand name legally to

distribute the products.

Trade-Related Entry Modes Investment-Related Entry Modes Others

Export

Subcontracts (Assembling of products locally)

Switch Trading

Compensation Trading

Buybacks

International Leasing

Branch Offices (International Representatives)

Licensing

Franchising

Build Operate Transfers (BOTs)

Joint Ventures

Subsidiaries

Acquisition

Strategic

Alliances

Entry Mode Wider Categorization

Figure 6: Entry Mode Choices - Wider Categorization


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Irregularities in licensing and registration of businesses in Tanzania was highlighted as an

unfavourable aspect of the region in PESTEL analysis. Through licensing Al Fakher would be able to

avoid the hassle as the risk would be transferred to the distributor who would be well aware of the

market dynamics and how to tackle these issues. The main costs concerning storage and

transportation of shisha products will be borne by the distributor which gives Al Fakher further cost

saving and higher profitability. Colombo (2014) concluded that licensing provides dual benefit of cost

advantage and additional revenues (in form of royalties). Luo (1999) also elaborated this argument by

explaining that firms adopting licensing will also benefit from higher return on investment (ROI).

However, licensing may also cause certain problems for Al Fakher. The company may lose control on

certain important business elements. Poor business decisions by the licensee may hamper the brand

image of Al Fakher. For example, the local company may consider taking illegal actions like bribing of

officials to get their paper work done as Tanzania has high level of corruption (as mentioned in

PESTEL). John and Letto-Gillies (1996) concluded that firms may risk surrendering their competitive

advantage as they opt for licensing to expand in foreign markets.

Marketing Objectives

After deciding mode of entry, Al Fakher needs to address its marketing objectives, which refers to the

organizational targets that needs to be achieved within a certain time frame. Smith and Taylor (2004)

explained that marketing objectives of organization may differ depending on their position in the

business cycle. Therefore, an established firm may seek to improve profitability and revenue through

marketing where as new entrant in the market will aim to increase its presence in the market, market

share and sales. Al Fakher should aim to capture the Tanzanian market to achieve the first movers

advantage by capitalizing the market share and setting up effective distribution channels with-in the

first year of entry. Bowman and Gatigon (1996) based their research on how order of entry affects the

market share for companies and concluded that larger market is captured, for a longer time, mostly by

the first entrant. Al Fakher needs to reflect its objectives of achieving significant market share and

setting up effective distribution channels in the four individual components of marketing: Product, Price,

Promotion and Place (Four-Ps).


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Market Segmentation, Targeting and Positioning

For product to become a marketing success, it is important for companies to ensure detailed market

research has been conducted to segment, target and position its product (Lynn, 2011). Market

segmentation refers to identification and classification of group of people with certain common

characteristics which can be helpful in making them potential future customers or buyers of the

product. Al Fakher’s market segment consists of mostly the owners of cafe, bars and clubs who would

be interested in buying the product. On a retail (individual) level, the market segment involves

customers ranging from 16 years to 35 years who may seek to be involved in socializing. Targeting is

simply focusing on the identified market segments. Positioning involves creating a brand image of the

product in the minds of the customers which will be discussed in the next section.

Product

The product decision of marketing should be directly linked with what the organization has to offer to

meet the demands of the customer. The tangible and intangible attributes of the product are highly

considered by the consumers when making purchase choices (Auger et al., 2010). Therefore, in order

to create a positive brand image in Tanzania, Al Fakher needs to ensure it makes careful product

decisions as well as focus on its intangible characteristics. The vision of Al Fakhir is to provide rich

shisha smoking experience to its customers which should reflect in its products.

Presently, Al Fakher’s product range has been divided into four types: Standard Range, Golden

Range, Special Edition and Non-Tobacco Range. All these four types of shisha flavours have unique

selling points. For example, the Golden Edition is an expensive range which offers finer cut blending

ingredients. Within these 4 types of shisha flavours, there are dozens of flavours offered by Al Fakher.


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In Tanzania, Al Fakher should kick-off with introducing the standard low priced range first as there is

higher level of income inequality as per PESTEL analysis. A low-priced range would cater all income-

level customers allowing the firm to assess the overall market without making larger losses and

achieving marketing objective of larger market share. Furthermore, Al Fakher will also be able to

analyse whether to create a brand image of a luxury product or as a standard affordable product based

on the response from the Tanzanian market.

Important aspects of the product decision are packaging and labelling. Al Fakher’s shisha flavour has

been a global product where packaging has remained standardized as part of creating brand identity.

The research by Strizhakova et al. (2011) has supported this view and concluded that in developing

countries consumers make use of self-identity brand signals while making purchases. Therefore, Al

Fakher should introduce its product as a global brand and keep consistent product design. The current

design of standardized range varies according to the choice of flavour together with an Arabic touch

to relate it to the Arabic culture. The bright and vibrant colours used by Al Fakher for its flavours are

useful to target the desired segment as it adds to the aesthetic dimension of the product. Creusen and

The Standard Range Packaging - Orange Mint Flavour The Golden Range Packaging - Orange Flavour

The Special Edition - Banana Motana Flavour The Non-Tobacco Edition - Peach Flavour

Figure 7: Showing Product design of Al Fakher's Product Range (Al Fakher, 2014)


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Schoormans (cited in Brunner et al., 2016) emphasized that consumers associate designs with certain

products while making purchases.

Since Al Fakher’s product involves tobacco, the labelling may have to follow certain regulatory

requirements. However, as mentioned in PESTEL, the enforcement of environmental laws in Tanzania

is very weak. Although Al Fakher can exploit this element, it is advised that the company follows the

laws to ensure it maintains its global brand image. Therefore, Al Fakher should comply with the

labelling requirements of the regulators. Figure 9 shows how Al Fakher complies with the tobacco

labelling requirement in Britain.

Figure 8: Showing use of vibrant color and Arabic touch in Al Fakher's Standard Range Packaging

(Al Fakher, 2014)


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Price

The strategic pricing of the product is the only marketing mix component that is directly linked to the

revenue of the company as all others are merely cost drivers. Therefore, pricing strategy is very crucial

in success of an organization. Pricing decision starts with understanding the market dynamics and

marketing objective set by the organization for international expansion. As highlighted in SWOT

Analysis, the Shisha flavour market in Tanzania remains untapped and therefore Al Fakher has to

implement prices that is line with the marketing objective set earlier, i.e. to capture the market share.

With the objective of building larger market share in Tanzania, it is advised for Al Fakher to consider

penetration pricing strategy. Ferrell and Hartline (2010) explained this strategy as setting of relatively

lower initial price levels to maximize sales and gain widespread market acceptance. Penetration

pricing would help Al Fakher to benefit from first movers advantage and build a name in the market.

Figure 9: Showing Al Fakher's Labelling of warning signs on its product in Britian (Al Fakher, 2014)


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As product is in its initial stage in Tanzanian Market, this pricing strategy will help discourage

competitors from entering the market (Figure 10). Lancioni and Gattorna (cited in Jobber and Shipley,

2012) concluded that this is the most successful approach to capture market share terming it as a

‘buying strategy’ as firms are literally buying share by lowering price levels (and profit margins).

To ensure successful implementation of penetration pricing strategy, Al Fakher has to consider various

marketing aspects. The foremost important aspect of using this strategy is the organization’s ability to

absorb short term losses (Farese et al., 2001). Being a global brand and one of the market leaders in

shisha flavor industry, Al Fakher has the financial capability to absorb initial losses. The pricing strategy

will also compliment the industry dynamics as the competitors are yet to enter Tanzanian Market.

Maximizing sales initially would provide Al Fakher with a head start. Furthermore, as the economy has

high income inequality, as suggested in PESTEL, Al Fakher can tap wider income groups through this

pricing strategy.

Figure 10: Al Fakher Shisha's Product Life Cycle

Current Position of Al

FakherTo Increase Sales it must

adopt Penetration

Pricing

Al Fakher Shisha - Product Life Cycle in Tanzania


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On the contrary, there may be few issues that the company have to tackle when implementing this

strategy. Firstly, as Al Fakher has been advised to use licensing as mode of entry, it will need to give

some compensation to the distributors to get them on board with this pricing strategy. This may include

discounts on license fees in the period when price levels are kept low. Smith and Parr (2004) claimed

that lower royalty rate can help encourage the licensee to agree for lowering the price of the product.

As Al Fakher agrees on lower fees from licensee, it may face with further reduction in profitability.

Further considerations include the legislative aspect of pricing tobacco products. In many countries

like UK there are price floors where companies have to charge minimum price for their products mainly

to discourage customers from buying the products. As per PESTEL and CAGE analysis, there is poor

implementation and enforcement of such laws in Tanzania. However, the increase pressure from anti-

tobacco groups may cause problems for Al Fakher.

As Al Fakher is advised to avoid using the single price worldwide and incorporating local factors into

consideration, it can be categorized as Geocentric Pricing. Keegan and Green (2016) concluded that

considering factors such as local costs, competition and local marketing strategy are key elements of

geocentric pricing.

Place

This marketing aspect focuses on how the product is made available to the customers. Distribution

channels are used by organizations for physical flow of the products in the relevant markets. Stern et

al. (cited in Obaji, 2011) referred distribution channels to essential mechanism and logistical support

that aids in transfer of goods to the final customers. Al Fakher has been advised to use distributor

licensing as mode of entry and therefore, would rely highly on the ability of the distributors to make the

product available to potential customers.

Al Fakher should ensure that distributor is highly capable and has good network in the market. It needs

to use the wholesale and retail channels to reach out to customers (Figure 11). Wholesalers can be

targeted to distribute the flavours in the shisha bars and cafes. Whereas for retail segment,

supermarkets and hypermarkets should be targeted to attract customers who wish to use shisha

flavours at home. Flower and Goh (cited in Lau, 2012) concluded that wholesalers help cover large

buyers whereas retailers cater smaller-quantity buyers. Shisha Flavours will be transported using

trucks and it is the most convenient and cheapest for of transport in Tanzania. As highlighted in

PESTEL and CAGE, the effective road network and infrastructure would prove this medium of

transport to be appropriate.


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Promotion

This marketing mix element revolves around organization communicating product information and

lifestyle dimensions to potential customer to influence their purchase decision. Rehmand and Syed

(2011) claimed that it is crucial for organizations to implement a well-managed, well-planned,

customer-oriented and psychological-driven prospecting approach to communication decisions. An

effective promotion and communication strategy of Al Fakher can directly affect the sales of their

shisha flavours and help achieve their marketing objective of maximizing market share.

Although the implementation and enforcement of tobacco laws are weak in Tanzania as mentioned in

PESTEL, Al Fakher would be required to comply with the regulation to maintain its global brand image.

Media advertisement of tobacco products is completely banned in Tanzania which can reduce the

consumption to their product (Figure 13). Furthermore, unlike UAE, tobacco shops are non-existent in

Tanzania (Figure 12). Therefore, the product specific distance between the two regions is quite

evident.

Figure 11: Showing proposal for Al Fakher's Distribution channel in Tanzania

Al Fakher - UAE

Licensed Distributor -Tanzania

Wholesalers Retailers

Shisha Lounges, Bars,Cafes, Tobacco Shops

Supermarkets and Hypermarkets


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As most of the promotional campaigns regarding tobacco-related products are regulated, Al Fakher

has only limited tools for promoting its shisha flavours in Tanzania. One of the most effective method

of communication is by using the Shisha lounges and cafes to promote Al Fakher’s product. Apart from

Figure 12: One of UAE's leading Tobacco Shops which offers variety of Shisha Products without any legal

restrictions

Figure 13: Showing impact of ban on Advertisment on consumption (Saffer and Chaloupka, 2000)


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posters inside the cafes, Al Fakher can also sponsor the cafe name boards and menu cards (Figure

14).

Another effective medium that can be used by Al Fakher is the internet. As outlined in the market

segment, Al Fakher would be focusing the youth for selling tis product. Since today’s youth is very

active on internet, using social websites would be very effective promotional medium to effectively

communicate with customers. Dahan and Hauser (cited in Fuller and Matzler, 2007) concluded that

customers effectively make us of the internet to search for products and communicate with the

producers. As internet is a global phenomenon, it can’t be controlled within boundaries of a country

like Tanzania. Social websites like Facebook, Instagram etc. have been very popular among

organizations to promote their products. Therefore, Al Fakher can make use of online marketing to

successfully communicate with its potential customers (Figure 15).

Figure: 14: Showing Al Fakher's sponsorship

on café menus


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Issues, Problems and Risks: Critical Analysis and recommendations

Global expansion strategy consumes great number of resources and high levels of investment of an

organization. Therefore, it is essential for companies like Al Fakher to comprehensively analyse,

research and critically evaluate its decision to expand. While planning the market expansion of Al

Fakher in Tanzania, many issues, problems and risks were identified that requires attention before

going ahead with the expansion plan.

The main issues in the business environment in Tanzania, as highlighted in PESTEL and CAGE, have

been the level of corruption and irregularities in business laws. Al Fakher’s current operations are

vastly located in developed economies compared to Tanzania. Therefore, it may lack experience in

dealing with these issues. Al Fakher has already been advised to use licensing, as mode of entry, as

part of the risk mitigation strategy. It is further recommended to hire an experienced candidate to head

this expansion project as it will help manage these risks and maintain the global image of the

organization.

Al Fakher’s strategy of using licensing as means of entering Tanzanian market has been discussed in

the above sections. Although the company has good experience in dealing with licensed distributors,

Figure 15: Al Fakher using Instagram Page and Facebook to promote its product and Brand


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it should ensure that the distributor is efficient enough to carry on the legacy of the company’s global

distribution channel. Maintaining good relations with the distributor and ensuring timely supply of

products is important to ensure that they comply with the organization’s strategy and objectives.

The overall analysis of the expansion strategy can be observed to be very costly for Al Fakher. The

price penetration, discounts on royalty fees to licensee and complying to the regulatory requirements

(e.g. 18% sales tax, minimum price floor, registration fees etc.) have been the major issues related to

additional costs. Although these costs can’t be avoided, Al Fakher needs to effectively manage its

finances. An effective budget and financial plan should be developed to ensure the cash and profit

cycle is known to the related stakeholders. As Al Fakher will achieve its marketing objective and grow

as a company, it can create new strategies to maximize profitability.

Lastly, the success and acceptance of the shisha flavours in Tanzania is another risk that needs to be

mitigated by Al Fakher. Categorized under the tobacco products, shisha flavour might not receive

positive welcome in Tanzania. The mitigation of this risk is the successful implementation of the

marketing plan of this report. As people will focus on the brand image and popularity of Al Fakher

worldwide, there would be a positive sentiment in the market regarding the products related to the

company which will eventually help them to achieve their objectives.

No. Major Issues Proposed Mitigation Methods

1 High Level of Corruption and Irregularities in Business Laws1. Licensing

2. Hiring Experienced Project Head

2 Issues with using Distribution Licensing as mode of entry

1. Choose effective distributors

2. Maintain good Relations

3. Timely supply of products

3 Overall costs of expansion plan is very high1. Effective Budgeting and Financial

Planning

4Shisha Flavour is a tobacco product and may not be received well

by the general public

1. Ensure effective implementation

of marketing plan

Figure 16: Showing summary of major issues that could be faced by Al Fakher and proposed mitigation methods


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Conclusion

Effective market expansion plan can help organization to successfully penetrate into new markets.

The report highlighted key elements that can impact Al Fakher’s market expansion in Tanzania. The

internal and external analysis of business environment of Tanzania, using SWOT, PESTEL and CAGE

analysis, provided evidence that the region is favourable for Al Fakher’s business operations. The

region is also favourable in terms of competitiveness as highlighted in the results of Porter’s five factor

model. The mode of market entry was recommended based on the market orientation and business

dynamics of Al Fakher. Finally, marketing objective was decided based on which a detailed marketing

plan was outlined that covered the 4Ps of marketing. A critical analysis of possible issues was also

carried out along with the recommended mitigation methods to ensure the organization is well aware

of the risks it may encounter.

Word Count: 4983 Words


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