University of

Greenwich
ASSIGNMENT SUBMISSION COVER SHEET
SUBJECT CODE

: BUSI 1602

SUBJECT TITLE

: Global Business and Sustainability

ASSIGNMENT TITLE

: Reflection Report

PROGRAMME

: MBA OUG International Business

SEGi ID

: SC-KL-00048271

UOG ID

: 000919448

LECTURERS NAME

: Mr. Vicky

LEARNING CENTRE

: SEGi COLLEGE KUALA LUMPUR

SUBMISSION DATE

: 24/4/2016

Contents
Introduction...................................................................................................... 2
Country Analysis and Entry Decision................................................................2
Currency exchange rates................................................................................. 3
World Toothpaste Market.................................................................................. 4
Product management....................................................................................... 4
Production........................................................................................................ 5
Distribution...................................................................................................... 6
Pricing.............................................................................................................. 7
Promotion......................................................................................................... 8
References....................................................................................................... 8
Appendix.......................................................................................................... 9

Introduction
In 1924, a U.S.-Based multinational consumer products company known as
Allstar brand is establish which produce and sells all kind of ethical
pharmaceuticals, OTC (over-the-counter or non-prescription) drugs, and
consumer product. Allstar brand is a firm with $8.9 billion and able competes
with all kind firms, based on which type of the product its market belongs. I
have been appointed as a country manage base in Latin America. Due to
most of our business in United State, operations base in Europe as well as our
Asia alliance are doing a very good progress. But the markets had begun to
saturated as more and more competitor is coming in. the business life cycle is
reaching a stage 3, where is it in the red ocean. The business started to
aging slowly and grow of population is in slow progress as well. On the other
hand, improving our business in America is too slow compare with outsider.
Hence in order to improve our situation we need to open up another new
business channel to increase our stock price. Therefore. I have been given a
mission to archive, which is to open up a market presence in Latin America.
Latin America market will be analysis and will decide which countries will be
penetrate fist and subsequently in 10 years time. The chosen countries are
as follow: Argentina, Brazil, Chile, Mexico, Peru, and Venezuela. Allstar brand
aim is at least to have 1 production facilities in one of the countries and show
a positive result in market share and profit as well as Alllstar Brands appear in
all 6 countries within 10 years time.

Country Analysis and Entry Decision

Latin America, population in the region is 50 percent larger compare to
United States and Canada. It is well known with the political issues and lots of
economy problem, such as high inflation rate, low growth and not willing to
take the tough economic actions to solve these problem. Spanish is the
majorities language being used across Mexico and Central and South
America, except for Brazil where they frequently use Portuguese as their daily
use language. Some population in South America even speak more than one
language.
In recent years, there have been many trade enhancement have been take
into action. Such as, NAFTA agreement between Mexico and United States
and Canada. Because of this agreement, it have improve the business
opportunity between this 3 countries. It has shown the great opportunity for
outsider to establish production in Mexico by taking the advantage of low
labour costs and fairly seamless access to the United States and Canadians
market. As for MERCOSUR agreement it provides some linkages between the
South American countries of Argentina, Brazil, Chile, Paraguay, and Uruguay,
Including association agreements with Bolivia. Beside the agreement mention
before, there are several agreement also exist to increase and ease the
business opportunity between countries.

By using the internet source from CIA site the table below compare the
economic and social characteristics of United States market and the six
markets is take into consideration as well. Table 1 and 2 below compare
economic and social characteristics of United States market and the six
markets under consideration.

Table 1 Market Comparison on Basic Economic Characteristics

Table 2

Market Comparison on Basic Social Characteristics

Currency exchange rates

By having difference in value of currencies may cause us difficult to make lots
of final decision. It might affect our following data analysis too. In Allstars
corporate office, we have to convert the cost and revenue into US$ for the
purpose of exchange rate fluctuation as it will affect consolidated reports
directly. On the other hand, local currency will be used for pricing and budget.
So, we have to manage in the local currency and culture. But stay focus on
the exchange rate changes. Table 3 shows the current exchange rate.

Table 3 Current Exchange Rate

World Toothpaste Market

Base on the report by Glodal Industry Analysts, Inc. it says that the global
toothpaste market to reach US$ 12.6 billion by 2015 and it could reach up to
US$14.0 billion by 2020. The largest market for toothpaste is own by Brazil,
which is 583 per capita consumption (in grams), United States come in
second with 539 per capita consumption (in grams). There are multiple type
of toothpaste available in the market, we are able to categorize it in few
category such as:

Size (25g, 75g, 150g)

Deliver system (tube or Pump)
Textures (gel or paste)
Formulation (basic, whiteness, healthy, kids)

Base on the chart below, it is the data collected from the country manager
teams by using survey and research method. Through the analysis we are
able to determine which country to penetrate 1 st and the following country.
However, based on the chart we were unable to determine when and how we
should penetrate the Latin America Market. Therefore we need to use Table 1,
2 and 3 as our further reference and help us determine the period of entry for
each country and by understanding the method require to do business in
Latin America market.

Product management
The key assets of Allstar Brands is Allsmile. In the United States, it is one of
the most well-known companys brands. Their production is based on United
States and Germany, mainly focus on European and United States markets.
Hence, stock keeping units (SKUs) are produce in large number. 3 line
extension have been developed to overcome the slow market growth in
United States and reduce competitor market shares. Each extension line have

their own target customer and benefits. Hence, there is total of 24 SKUs of
Allsmile in the United States market:

The existing SKUs formulation will be used for market entry in Latin America,
country manager will decide which type of toothpaste will be used in chosen
country. Basically all 4 type of the 24 SKUs will sell those countries as a
introduction of Allstar brands. After that we will do some review of the
performance then only we invest more resources into it. In order to build
customer relationship more easily, it is necessary to produce our packaging in
others language such as Spanish and Portuguese to suit the local culture.
By using the limited number of SKUs to enter the Latin America market at the
first stage and follow by expansion in the market will show as below:

Performance such as growth rate of the product and the market

penetration will be review from time to time. if the review is positive,
more SKUS will be added into the first stage.
Once we have a one market entry success, we can use the similar
method to penetrate other countries. It can be using the same product
as introduced in stage one, but totally different SKUs.

Production
To manufacture and deliver toothpaste is surprisingly easy. Production can be
done in any location around the world and shipped to the anywhere. On the
other hand, it would not be a problem to manufacture at local, if the company
have its own facility at local.
We can directly purchase toothpaste from the parent firm base in United
States as well for a short term source of capacity, but the overall costs will be
slightly higher than locally manufacture. Other than that, the United States
show a promise that it have a trustworthy productive capability and an
overall stable currency.
Having a production in locally is another method to have toothpaste.
However, it needs time and money to building a plant as well as growing its

size. Once it achieve the significant volume the cost per unit should be lower
with a local production.

A major trade off is between lower per unit manufacturing costs from plants
operating at high capacity versus lower shipping costs by producing in or
close to served markets. A second trade off can involve decreasing
production costs with higher volume versus increasing duties, taxes, and
tariffs because of border crossings. (Interpretive Software, Inc. 2008, p. 16)
We need to be very caution when making a production decision, else it will
affect the market entry flow and cause difficulty in following expansion in
Latin America market. For example, a plant serving just one country may not
achieve low COGS due to relatively low volume. But when the plant begins
producing for a second Latin American market, higher volume and capacity
utilization may yield lower COGS that are realized in the initial and the new
markets. (Interpretive Software, Inc. 2008, p. 16)

Distribution
In most of the retails outlet in United States sale domestic toothpaste.
Grocery stores (e.g. Kroger), drug stores (e.g. Rite Aid), mass merchandisers
(e.g. Wal-Mart), convenience stores (e.g. 7-11), and other outlets (warehouse
clubs, etc.) all sell toothpaste. By focusing on most of the type of means that
many national accounts have been distributed directly by Allstar. Indeed,
various retail accounts consist of approximately 70 percent of Allsmile
volume. There are still, however, a number of smaller local or regional stores
that require the use of an indirect channel via wholesalers. (Interpretive
Software, Inc. 2008, p. 17) In Figure 2 show the visual illustration of direct
versus indirect distribution.
Figure 1: Distribution Structure Direct vs. Through Wholesaler (Indirect)

manufactu
re

direct

retailer
custome
r

manufactu
re

wholesal
er

retailer

custome
r

Different country have their own type of retailer which will keep their
toothpaste in stock. In United States, we noticed that there are less type of
retailer who is selling toothpaste in United States compare to the rest of the
world. Besides that, as there are more retailer joining up to form an

international alliance. It cause the market around the world to become less
saturated compare to United States. This is how the market should develop,
while the old fashion family base retailing remain unchanged.
In Latin America, the distribution channels can be categorizes as: old fashion,
self-serve, and hypermarket. Due to the traditional channel is small,
majorities of the stores and market are serve by wholesaler, not by
manufacturer. Convenience store and grocery store are consider as a selfserve category which is a bit more advance store where the consumer were
able to help themselves out with purchasing. But it only has a narrow line of
merchandise. Even though some of them are reginal chain, but mostly are
owned by locally. Usually large city have hypermarkets and this is a new
distribution channel. Normally it able to store all its goods and directly get the
items from the manufacturer. For example, Wal-Mart and Carrefour are one of
those who allied with global distributor or owned by foreign hypermarket
chains.
Product turnover, slotting allowances, sale force support, and advertising
support are very crucial for the brands to move, together with distribution of
shelf space and positioning. Hypermarket and chain self-servers belongs to
allowance and turnover. As for old-fashion stores and independent self-serve
focus to sales force support.

Pricing
When manufacturer determine the MRSP, product cost and market conditions
will need to be consider. To set a manufacturers suggested retail price
(MSRP) is based on following:

Size
Delivery system
Texture
Formulation

Although retailers have the right to over the final price set in the store,
however many choose to follow the MSRP respectfully. 15-30 percent of the
MSRP will be given out by manufacturers base on volume purchased and
which channel is chosen. Manufacturer will calculate the per unit revenue
using (MSRP) (1-discount).
In different country they have their own pricing terms and agreement. By
agreement, MSRP and quantity discounts are set by manufacturers in Latin
America. When setting the price, there are few thing in a country need to be
consider.

Price sensitivity
Market competition
Cost

Furthermore, if the price difference between country market is to big far the
same brand. It can cause the product alteration through unauthorized dealer
and the market price change from higher to lower.

Promotion
A marketing strategy in consumer product consist of two major part,
consumer and trade promotion. Lots of event planned by trade promotion to
maintain customer interest towards a brand. Slotting allowance and co-op
advertising is the general type of trade promotion.
Type of
promotion
Slotting
allowance

Co-op
advertising

Purpose

Used by weaker brands

Help ensure shelf space
As discounts from MSRP
Affect gross margin
Brand feature in channels advertising
Expenses included in promotion budget
Affect net contribution

There are few types of normal promotion method to attract consumer such as
giving out some free tester, discount coupon or voucher and point-of
purchase display. Like co-op advertising, these expenses are include for as
part of the promotion budget and it will cause changes in the net
contribution.

References
INTERPRETIVE SOFTWARE, INC. (2008). Country Manager: The International
Marketing Simulation. [online]. Last accessed 22 April 2016 at:
http://www.cbpp.uaa.alaska.edu/afef/cmgr-student%20manual.pdf

Appendix