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COMPLIED BY: 200786531, 200743415, 200774327, 200809486, 200818064 & 200792145 THE UNIVERSITY OF LIVERPOOL INTERNATIONAL MARKETING REPORT TO OUTLINE HOW MACKIE’S COULD LAUNCH THEIR SALT AND VINEGAR POTATO CHIPS INTO THE GERMAN MARKET

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Page 1: Netnography Diaries

REPORT to outline how Mackie’s could launch their salt and vinegar potato chips into the german market

COMPLIED BY: 200786531, 200743415, 200774327, 200809486, 200818064 & 200792145

The University of Liverpool INTERNATIONAL MARKETING

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Contents1.0 Introduction..............................................................................................................................................................2

2.0 Key economic indicators............................................................................................................................................3

3.0 Cultural indicators.....................................................................................................................................................5

Cultural Recommendations for the sensitization of staff............................................................................................7

4.0 Launch strategy.........................................................................................................................................................8

Price............................................................................................................................................................................8

Product........................................................................................................................................................................8

Place............................................................................................................................................................................9

Promotion...................................................................................................................................................................9

Key Factors to be taken into consideration...................................................................................................................10

5.0 Conclusion...............................................................................................................................................................12

6.0 Bibliography............................................................................................................................................................13

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1.0 IntroductionMackie's, established in 1986, is known for its Scottish ice cream, but in 2009 created a joint venture with

Taypack of Scotland to diversify into a new market (Mackie's of Scotland, 2013). Adopting Ansoff’s (1957)

product matrix – diversification – new products into new markets, Mackies have expanded their product

portfolio to flavoured crisps in the UK market. This venture has currently produced revenues of £700,000 in

2010 and £2.5million in 2011 (SDI, 2012) successfully identifying a gap in the concentrated UK savoury

snack market.

Mackie’s company values will allow them to gain a competitive advantage over competitors in the host

market. Self-imposed targets to be 100% fuel efficient have been successful in achieving their objectives to

become more reliant on renewable energy sources (Hayhow, 2011 ). Investing in renewable energy

incentives, notably wind turbines in 2005, has accounted for 70% of energy required by Mackie’s since

2007 (Askeland, 2012). Continued investment in renewable sources and the development of anaerobic

digestion to create electricity, has allowed them to sustain a competitive advantage by keeping costs down

(Tangney, 2012). Gerry Stevens from Scottish Development International (2012) stated that Mackie’s are

saving approximately £300,000 a year, with plans in the future to improve efficiency further, allowing them

to allocate their resources on delivering a higher quality product.

Audrey Leng (2012), International Senior Executive of Scottish Development International, said: ‘Mackie’s

at Taypack is a forward-thinking, internationally focused company.’ Having already launched a range of

their products into the US, the objective of this report is to provide a set of recommendations as to how

Mackie’s could introduce their salt and vinegar flavoured crisps into the German savoury snack market,

increasing their presence as an internationally focused company.

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2.0 Key economic indicators

With a GDP of $3.4 trillion, the German economy is stronger than the UK’s at $2.435 trillion. Germany has

by far the most powerful economy in the EU making it a prime target to launch a product into (Anderson,

2012). The UK and Germany have strong export ties as they are both EU members. Exports to Germany

accounted for 10.9% of UK exports in 2011 (Marketline, 2013). The infrastructure for distribution to

Germany is well established, meaning that Mackie’s would not incur high start-up costs when exporting

their salt and vinegar crisps to Germany.

Despite being a smaller market than the UK, Germany is the second largest consumer of potato chips in

Europe with 11.3% share of the market.

The German

crisp market is

expected to grow

by 15.5% to a

value of $661.9m

by 2017

. The German crisp market is mainly dominated by two manufacturers: the Intersnack group and Lorenz

Bahlsen Snack-World, who between them account for 76% of market share (Marketline, 2013). Despite the

share of these two groups the market is very accessible through supermarkets and hypermarkets which

represent 71.7% of distribution channels. Germany also have price conscious consumers which can make it

more difficult to enter a new market, however previous new entrants have succeeded by offering unusual

ingredients (Marketline, 2013). This would be beneficial for Mackie’s salt and vinegar flavoured crisps as

this flavour does not currently exist in Germany. Furthermore, Mackie’s uniquely flavoured products were

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well received at a recent trial in Germany (Mackie's of Scotland , 2013). This means that with the right

strategy, entry into the German market could be successful, resulting in Mackie’s gaining a quick market

share.

Germany has a robust democratic setup ranked in the 92.5 percentile for voice and accountability

(Marketline, 2013), and a gini coefficient of 78% (Rentoul, 2013) higher than the UK, which is ranked at

88.7 respectively. This illustrates the strength of the democratic system within Germany.

The German and UK governments are both heavily investing in renewable energy. The German Renewable

energy act (Federal Ministry for the Environment, Nature Conservation and Nulear Safety, 2012)

encourages companies to use renewable energy sources. Mackie’s can capitalise on this legislation and

increase revenue by selling their renewable energy to the German grid in a 20-year contract (Rickerson,

2007). These strong ecological polies could provide Mackie’s with a sustainable advantage and minimise

barriers of entry into the market.

A comparison of Porter’s five forces driving competition in the savoury snacks market in the United

Kingdom and Germany in 2012. This analysis on the crisp market shows the similarities between the

domestic and host countries.

United Kingdom Germany (Marketline, 2013)

A key consideration for the company would be the threat of substitute products, especially if supermarkets

are used as a primary distribution channel, supermarkets allocation of shelf space (Lim, et al., 2004) could

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be paramount to the success of salt and vinegar crisps in Germany as they will be competing in such a

competitive potato chip market.

Also, If the Scottish National Party succeeds in their referendum for independence in 2014, Mackie’s could

face serious implications when attempting to export their products (Bignell, 2013), including their exports

to Germany, as independence would mean losing membership in the EU, NATO, the Commonwealth and

The United Nations as there would be greater barriers to trade outside Scotland (The Economist , 2012).

3.0 Cultural indicators

Defined as “the dynamic relationship between value and behaviours”, culture is essentially “the way we do

things round here” (Bower, 1966). It provides the base that drives behaviours (Frost, 2000): the set of

values used by groups to frame or guide the way they behave. The topic continues to be an issue for

organisations to consider both internally and externally, though as organisations are becoming

progressively ‘global’ it is becoming an increasingly complex, as it is the large MNE’s that that are required

to be the most sensitive to the multidimensional concept of cultural fluency (Myers, 1995).

#Mackie’s cannot afford to overlook this. The firm must not only negotiate their own corporate culture, to

enter Germany successfully, they must identify and understand the host-country’s ethnic differences at

regional and pan-national levels; differences in the industry cultures of the crisp and savoury goods

market; and the various cultures of German population. A sizable proportion of the German population,

2.4% (Central Intelligence Agency, 2013) is of Turkish decent. There are significant differences between the

Turkish subculture and German mainstream culture (Schmidt, 2008). This has a big impact on German

culture and needs to be kept in mind when considering launching a product into Germany. In Mackie’s

case, this would not affect them too much, as the flavours within Salt and Vinegar crisps would not impact

upon religious beliefs.

As explained by Hampden-Turnder & Trompenaars (1993), Germany’s business culture can be largely

defined by three key cultural dimensions; integrative, communitarian and highly Universalist. The 5

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combination of these values begin to describe the German’s “highly codified economic system in which the

state and private enterprise co-operate in developing and regulating business activity to an extent

unthinkable in the more individualistic cultures” (Hampden-Turner & Trompenaars, 1993, p. 202). In fact,

the Universalist and integrative cultural values are believed to be responsible for the countries business

strength.

However, Mackie’s must consider that German management culture is slow to change (Randlesome, 2000),

as are German management competencies. Despite this, German managers and workers are likely to

demonstrate a high level of commitment to the firm as they believe that their performance is a matter of

“national prestige” (Boyle, 1995). In addition, German employees will be more concerned about the

success and well-being of the corporation.

Mackie’s must also remember that, Germans are much more direct than Brits (Evans, 2011). This has many

implications. For example, with the packaging of the crisps Mackie’s would be better off with a much

simpler, straightforward packet. When BMW bought the British car manufacturer, Rover, it took a while for

the seriousness of some of the problems at Rover to sink in. All too often, British managers spoke in

euphemisms that their German counterparts took at face value (Evans, 2011).

Germany is the second largest crisp consumer in Europe (Marketline, 2013), this would mean that Germans

are accustom to potato chips, and would not find a new flavour unusual as the base of the product is still

the same. Mackie’s, could therefore enter the German market knowing that their product is culturally

normal and would not generate an adverse reaction from the consumer.

As outlined earlier, it would be advisable for Mackie’s to export their product to Germany rather than

setting up production facilities out there, as costs would be unjustifiably high. Therefore, Mackie’s should

culturally sensitize their UK based staff in order to deal with German purchasers that are operating on the

behalf of the seller in Germany. Mackie’s staff needs to know that Germans like to get straight to business;

there is no word in German for small talk (Evans, 2011).

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Cultural Recommendations for the sensitization of staff

We recommend that Mackie’s should culture sensitize it staff using simulation training. The main uses of

simulation training were first laid out by Gagné(1962) as, training and education, assessment of

proficiency, and development of operational research. We recommend that Mackie’s employs native

Germans to train their staff, in order to culturally sensitise the British employees dealing with exports. A

good way to conduct this training would be through case studies and role play (Hurn, 2011 ). By using

these training methods in a classroom, trainers can access the proficiency of the workers b efore they deal

with actual transactions. This will mean that UK staff can experience, first hand, how Germans

communicate in business.

By employing Germans to train employees, the UK staff would be able to gather any extra information

from the people who grew up within the culture and have first-hand experience of it, more so than that of

a lay person who had merely studied it. These methods of training would lead to the best possible

operational research for staff and would be the most effective way for the UK staff to gain and insight into

the German culture.

4.0 Launch strategy

The Marketing Mix is a crucial framework to refer to when identifying the key stages of launching a

product into a new market as it is vital to place the right product, into the right place, at the right price, at

the right time (Afsar, 2011).

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Price Price can be defined as the amount of money charged for a product or service, or the sum of the values

that consumers exchange for the benefits of having or using a product or service (Kotler, 2005). On

average, within the German market the normal price paid for a 200g bag of potato chips is around 1.50 to

3.50 Euros (Fjalestad, 2010). It would be advisable for Mackie’s not to price their product range within

Germany any higher than existent savoury products in the country. However, overheads must be covered

and in deliberation of the fact that Mackie’s products are produced at a greater cost, it is vital that

Mackie’s price of salt and vinegar potato chips allows them to gain a foot hold in the market. In

consideration of these issues, perhaps a valuable strategy to use would be penetration pricing, by

increasing the products price after it has gained an adequate share in the market and the German

consumer has grown to like it.

ProductFrom the offset, Mackie’s had plans to expand its market capabilities on an international scale, having

conducted extensive amounts of market research into how the brand would be received overseas

alongside conducting product trials in order to gain an understanding of which flavours would be favoured

abroad. According to Harness (2012) Germans prefer to eat paprika flavoured crisps over any other

flavour. Launching a completely new flavour into the market such as Salt and Vinegar would hopefully

generate excitement among German consumers, as many are familiar with the flavour, but are not able to

purchase it within their home country.

PlaceMackie’s crisps tend to be foreseen as an exclusive product and this should be considered when deciding

on an appropriate distribution outlet before the product is launched in Germany. As Mackie’s crisps are a

more upmarket product they may be more suited to a supermarket such as Edeka (Edeka, 2013), as the

people who shop there appreciate the high quality ingredients and are therefore willing to pay extra. This

being said, if lower end supermarkets such as Norma came to a suitable arrangement to stock Mackie’s

Salt and Vinegar crisps and agreed to promote the product by offering them sufficient shelf space within

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their stores (Lim, et al., 2004), then this could be used as an ideal opportunity to establish its product in the

German potato chip market.

PromotionAccording to The Chartered Insitute of Marketing (2013), Promotion is not just about advertising your

business, nor is it just about selling. It is about pulling together a range of techniques, in the most cost-

effective way, to initiate, increase and maintain awareness of what you offer to your customers. This is a

key concern for Mackie’s and must be considered before launching their products in Germany, as without

adequate promotion and advertisement it is likely that the move would result in market failure. At this

stage in the product life cycle, informative advertisement must be used to promote the products, whilst at

the same time considering various cultural differences. For example, British people like to speak in

euphemisms, whereas German’s speak literally and take what they hear at face value (Evans, 2011). This is

important when deciding on appropriate packaging, as it is crucial that the German consumer understands

what the product is, as if the packaging is confusing, Mackie’s may struggle to gain a foothold in the

German market with their salt and vinegar crisps.

Key Factors to be taken into consideration

Selection of overseas markets and entry modes lies at the very heart of any international strategy (Douglas,

1972). The Importance of relevant analysis, and of resulting decisions, grows with increasing dependence

of organisations on international business for survival and growth. Similarly, a growing intensity of

competition would call for an improved quality of the overseas market and entry mode selection (Nevin,

1981). However, regarding Mackie’s current position in their domestic market, a full scale overseas

investment may be too early to consider. According to Hollensen (2012), size is an indicator of the firm’s

resource ability; increasing resource ability provides the basis for increased international involvement over

time. Building on Hollensen’s theories, Mackie’s have taken relevant steps to expand their resource 9

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capacity such as the relocation of its core factory domestically (Mileham, 2013). This is set to more than

double output, increasing production. This will require a huge investment and will be partly funded by the

Scottish government and Clydesdale bank. This has been a requirement for Mackie’s due to the extension

of its product portfolio. However, they remain small in comparison to Intersnack group and Lorenz Bahlsen

Snack-World who would be considered as their main competitors, meaning that export modes are a far

more realistic approach to the German market.

Another firm-specific factor influencing mode of entry is the international experience of managers and

firms. International experience reduces the cost and uncertainty of serving a market, and in turn, increases

the probability of firms committing to foreign markets. Johanson and Vahlne (1977) assert that uncertainty

in international markets is reduced through actual operations in foreign markets (experiential knowledge)

rather than through the acquisition of objective knowledge. This direct experience with the German

market, could potentially increase the likelihood of Mackie’s committing extra resources in the future. By

building their familiarity with the German market through direct experience, Foreign Direct Investment

(FDI) in the future would be a feasible option as Mackie’s acclimatize to the aforementioned aspects of

culture.

Finally, the physical characteristics of Mackie’s product are important in determining where production is

located prior to launch. Because their products are of low value/weight ratios, establishing licensing

agreements through cooperative export partnerships could be beneficial. Mackie’s could therefore take

advantage of a collaborative agreement with a German firm to tackle export marketing. With the UK

having strong export ties with Germany already, due to the fact that they are both members of the EU,

accounting for 10.9% of exports in 2011 (Marketline, 2013), the infrastructure used for distribution to

Germany is therefore well established. As previously mentioned, the set-up of a larger, more efficient

domestic factory will help to satisfy international demand which could increase turnover by 48% (Mileham,

2013). Conversely, if Mackie’s decides to enter the German market with its Salt and Vinegar potato chips it

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is crucial that they create strong ties with a major German distributer, in order to effectively establish their

product within the market.

5.0 Conclusion In conclusion, our key recommendations for Mackie’s on how to effectively launch their Salt and Vinegar

potato chips into the German market are as follows:

The economic indicators suggest that Germany is a suitable market for Mackie’s to introduce their Salt and

Vinegar potato chips. Strong political ties in the EU will reduce the barriers to entry. Reduction on tariffs,

increased quotas and established distribution channels for exports will contribute to a low cost, low risk

venture with potentially high returns. Legislation could provide sustainable revenues and provide easier

market access for Mackie’s. Depending on the political situation of the domestic market exporting appears

to be the most logical market entry strategy though should Scotland become an independent state it might

want to consider a joint venture.

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Mackie’s should employ native Germans to act as agents, for cultural training, using simulation-training

methods such as case studies and role-plays to sensitise UK staff. They also need to mediate between

mackie’s (the supplier) and supermarkets (the distributors), developing strong networks of supermarkets/

hypermarkets will be crucial to the launch and success of Mackie’s.

When entering the market, Mackie’s careful review of the marketing mix should be designed to position

them as a luxury crisp product, to make sure that the brand’s communications are consistent in the host

and domestic markets. We believe a combination of these factors would make Mackie’s Salt and Vinegar

crisps a success in the German Market.

6.0 Bibliography

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