Global marketing strategy means coordinating marketing strategy and activities across a number of countries. Cultural and regional differences can have a massive impact on the success of marketing initiatives, so it is crucial that an international perspective is adopted by the marketing team.
To illustrate a successful global marketing strategy, we take a look at Glanbia’s international expansion as a relevant example.
Case Study: Glanbia PLC
Glanbia is divided into four segments: US Cheese & Global Nutritionals (Ingredient Technologies, Performance Nutrition, and Customised Premix Solutions), Dairy Ireland (Dairy Ingredients, Consumer Products and Agribusiness), Joint Ventures & Associates (Southwest Cheese in the USA, Glanbia Cheese in the UK and Nutricima in Nigeria and smaller Irish-based JVs) and Other Businesses.
International SWOT Analysis
Glanbia is a global market leader in dairy, cheese & nutritional ingredients. ‘In FY2011, they processed 5.8 billion litres of milk, produced 485,000 tons of cheese, and manufactured 263,000 tons of dairy-based ingredients’. In Europe, they are one of the biggest manufacturers of enriched milk powder. They are also a leading player in the US Cheddar cheese market (Glanbia SWOT Analysis, 2012).
Glanbia’s acquisition of BSN in 2011 produced strong revenue growth. “Its products are shipped to over 40,000 retail outlets in the US and distributed in over 90 countries worldwide”. “The group’s leading market position in Ireland and the US gives it significant bargaining power” (Glanbia SWOT Analysis, 2012). This power allows Glanbia to produce at a lower cost and increase profits.
Over 10% of Glanbia’s pension hasn’t been funded. “In FY2011, their pension obligations stood at €448.4m as compared to the planned €400m” (Glanbia SWOT Analysis, 2012). This on-going debt forces Glanbia to allocate some of their revenue towards this pension liability. This reduces the resources which can be allocated to further internationalisation.
A joint venture is underway with Glanbia Co-operative Society to form Glanbia Ingredients Ireland. They will work with Dairy Ingredients, the largest dairy processor in Ireland ‘assembling a milk pool of 1.6 billion litres and processing it into 180,000 tons of dairy ingredients for export to over 50 countries’ (Glanbia SWOT Analysis, 2012). This will enhance dairy sales in Europe and is a good strategic move before the abolishing of the EU Milk quota in 2015. “GII will increase existing peak dairy processing capacity up to 60%; a total investment program of €180 to 2020” (Glanbia Shareholder Meeting, 2012).
Following the acquisition of BSN, Glanbia acquired Aseptic Solutions USA for $60m in July 2012, a manufacturer of dietary supplements. ASI products are designed by state-of-the-art technology to create a ‘better tasting and longer lasting product’ (Glanbia SWOT Analysis, 2012). This technology could be implemented into Glanbia’s other divisions worldwide.
This industry is highly regulated and new regulatory framework on chemicals was introduced to the EU – REACH. In USA, trade group Flavour & Extract Manufacturers’ have generated a safe-list for their flavourings. These protocols cost time and money to provide documentation, safety measures and testing on each product. If a product fails to meet these standards, revenue would suffer as well as brand image (Glanbia SWOT Analysis, 2012).
Market & Product Selection
Glanbia has a strong presence in key food markets around the world. The group has manufacturing operations in 7 countries, sales and technical support locations in 14 countries and its products are sold to over 130 countries worldwide (Glanbia´s Annual Report 2012). Glanbia competes on a truly global basis, with the exception of some African and Middle Eastern nations;
US Cheese is a B2C division which produces American style cheddar cheese for international markets. In contrast, Ingredient Technologies supplies nutritional ingredients on a B2B basis globally. In January 2011, the acquisition of BSN allowed the Performance Nutrition division of Glanbia to expand its presence in the key nutritional market. Their product range now includes Flaxseed, Micronutrient Premixes and Milk & Whey Proteins (John Moloney, Managing Director of Glanbia).
Milk is the key raw material for Glanbia’s Dairy Ingredients and Consumer Products businesses. Most of this product (83%) is destined for sale internationally and they export to more than 50 countries globally while the other 17% is processed by Consumer Products into fresh dairy products and liquid milk for the Irish market (Glanbia Annual Report). Consumer Products Ireland has number of global brands including Avonmore, Yoplait, Kilmeaden and Premier (glanbia.ie). Glanbia’s Agribusiness does not operate internationally, as it just serves Irish Farmers (GlanbiaAgribusiness.ie, 2012).
Glanbia’s Joint Venture, Southwest Cheese, produces American cheese and whey protein in the U.S. Glanbia Cheese supplies the European pizza market with mozzarella cheese and Nutricima supplies milk powder-based products in Nigeria. These JV’s allow Glanbia to supply markets which would otherwise be inaccessible.
Glanbia´s business in Asia grew strongly in 2011 with exports from US cheese, Global Nutritionals and Dairy ingredients Ireland. There was a strong demand, particularly in China, Malaysia and Singapore and re-emerging demand from Russia (Glanbia Annual Report 2010).
Modes of Entry
This decision is one of the most crucial choices that an internationalising firm has to make (Root, 1994). Glanbia’s international operations include exporting to 130 countries, joint ventures and the acquisition of wholly-owned subsidiaries in foreign markets. In this way, Glanbia utilises all three types of entry mode – export, intermediate and hierarchical.
As we can see below, an increasing percentage of Glanbia products are being exported each year making this an important area of focus. In South America and Asia Pacific, the key export opportunities are Performance Nutrition, US Cheese, and Dairy ingredients. Other key export regions are North America, Europe and Africa.
Joint Ventures not only share the control and risk, but split the ownership. In 2003 “Glanbia forms joint venture with Dairy Farmers of America and Selected Milk Producers to build whey processing plant; forms joint venture with Conaprole to enter Latin American market” (Glanbia, 2004). Glanbia has formed joint ventures with firms in North America, Europe and in Nigeria – each with a 50/50 split ownership.
US Cheese is an example of where Glanbia decided that the optimum strategy was to use a hierarchical entry mode.
Glanbia makes use of each type of entry mode, which means that their resource commitment varies largely depending on which division of Glanbia is being analysed.
As illustrated above, an increasing number of Glanbia’s products are being exported so the balance of their overall resource commitment to internationalisation is decreasing. Having said this, they still have manufacturing plants in 7 locations and sales/technical offices in 14 locations globally – representing a high commitment of resources. This mixed internationalisation strategy means we cannot say that Glanbia is fully internalising or externalising.
The expansion of Dairy Ingredients Ireland’s value-added whey manufacturing capability with a total investment of €21m will be completed in the second half of the year. This will further enhance their export capacity.
Glanbia’s wholly-owned US Cheese business, and the Southwest Cheese joint venture, is a leading producer of American-style cheese for the US and export markets from its large scale manufacturing facilities in Idaho, with a significant market share. This business operates modern, large scale, efficient plants in two leading milk producing regions in the USA. In addition they have recently acquired a US dietary beverage firm for €50m – this all represents a high resource commitment to internationalisation (Irish Times, 2012).
Socio-Cultural and Ecological Environment
Ireland is endowed with all of the natural advantages for dairy producing – good soil, mild climate and moisture-bearing winds (Geraghty R., 2011). There are also a lot of good quality green zones – Ireland is a great place for livestock. Combined with the agricultural background of the country this makes Ireland ideal for dairy producers. This could explain why Glanbia is based here.
With turnover of €3.4bn, €2.5bn of which from exports, and 7,000 direct employees, dairy processing is one of Ireland’s key exporting industries and biggest employers. It supports 19,000 dairy farmers and accounts for 30% of Ireland’s agricultural output. In Ireland, 6 companies process 80% of milk produced. One of these companies is Glanbia (Geraghty R., 2011). “Dairy products have long formed the backbone of Ireland’s agricultural sector”. Ireland has focused on its trade on dairy products for over 200 years (Murray J., 2007).
Glanbia’s main competitors are:
Groupe Danone: A French company who focus on fresh dairy products, water, and infant and medical nutrition. They are the market leader of fresh dairy products worldwide and offer dozens of yogurt brands, including Danone, Activia and Stonyfield Farm.
Kerry Group plc: An Irish company, one of the largest food companies in Europe.
Offering some 15,000 products, Kerry’s primary business is ingredients. These include seasonings, flavourings, fruit preparations, and dairy-based ingredients.
Arla Foods amba: A Swedish/Danish cooperative offering milk, butter, cheese, yogurt, and cream. Its major brands are Lactofree, Cravendale, Anchor, Lurpak and Denmark’s Finest. They export to markets across Europe, U.S., Asia, and the Middle East (Hoovers, 2012).
While there is strong competition, Glanbia strategically partners with companies in other locations to quickly expand its global presence and increase market share. For example, Glanbia is the largest producer of mozzarella cheese in Europe due their joint venture arrangement with Leprino Foods in 2000 (FundingUniverse, 2004).
Legal/ Political Environment
In recent weeks, Glanbia’s claim that Prolibra can reduce body fat has been rejected by the EFSA. This is just one example of how the tight regulations in this industry can restrict and impact a company’s strategies (NutraIngredients, 2012).
Glanbia started its first joint venture in 2000 and pursued this strategy throughout the decade. More recently they have been focusing on acquiring smaller companies to expand their product portfolio. This aggressive internationalization strategy has been very successful – they are now Ireland’s top dairy producer and one of Europe’s major dairy groups with a significant position in the U.S. cheese and food ingredients markets.
“Glanbia’s operating profit increased 20.4% to €26m mainly due to the performance of Glanbia Cheese and an improved performance in Nutricima” (Glanbia, 2012). Further growth is likely as they’re increasing their investment in their international activities (Irish Examiner, 2012) – the future looks bright for Glanbia!
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