International Marketing: Iceland

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Contents

Executive Summary 3

Introduction 4

Mission Statement 4

Market Choice 4

Table 1 5

Quantification, Weighting and Ranking 6

Table 2 7

Internal Analysis 8

Overview of Iceland 8

Marketing Factors 8

Financial analysis 8

Manufacturing factors 9

Iceland's current resources and competencies 10

Table 3 10

The Boston Consulting Group matrix (BCG) matrix 10

Figure 1 10

External Analysis 10

PESTLE 11

Competitive Environment 12

Retailers 12

Table 4 12

Frozen Food Manufacturers 12

Table 5 13

Customer Trends 13

Target Market 14

Porter's Five Forces 14

Figure 2 14

Lotte Group Analysis 14

SWOT 15

Strengths and Weaknesses 15

Opportunities 16

Threats 16

Objectives and Market Entry Strategy 16

Objective 1(Short term: 12 months) 17

Objective 2 (Medium Term: 1-3 years) 17

Objective 3 (Long Term: 3-5 years): 18

Internationalisation objectives 18

Marketing Mix 19

Product 19

Price 21

Table 6 21

Table 7 21

Promotion 22

Place 23

People, processes and physical evidence 24

Implementation 25

Table 8 26

Figure 3 26

Figure 4 27

Control 27

Figure 5 28

Bibliography 28

Executive Summary

This report has been produced to provide Iceland Foods Group with a strategy to further internationalise. After investigation of potential countries it was decided that South Korea was the best market to enter. Analysis has been undertaken into both the external and internal environments with regards to South Korea and Iceland. Research into the frozen food sector in South Korea has shown the market is growing .The success of Iceland within the UK and other European markets, within which they operate, has led to the recommendation of entering South Korea via a staged market entry approach over five years. This will be achieved through exporting, contract manufacturing and a strategic alliance. All dimensions of the marketing mix have been considered, utilising both a standardised and adaptive approach where necessary, to ensure that target consumers requirements are met. The entry strategy has been conducted with different SBU's from the Lotte Group; based on their local market expertise and routes to market. This report concludes that operating in South Korea with an established intermediary and selling exclusively in their stores is a viable entry strategy. This allows Iceland to build local knowledge, penetrate the market and ultimately generate sustainable competitive advantage.

Introduction

Iceland was founded in 1970 with the first store opening in Oswestry, Shropshire by Malcolm Walker?1. Iceland is performing strongly financially?2 and is viewed as one of the UK market leaders in frozen food sales, hence the decision to proactively internationalise. Internationalisation can bring many advantages for Iceland, most notably a secure source of long term profitability. Specific objectives of this report are:

1. Thorough analysis of potential markets

2. Analyse both internal (Iceland) and external environment using specific tools

3. Explain foreign market entry strategy and set achievable objectives

4. Consider all areas of the Marketing Mix in detail

5. Consider how to implement these within the chosen market

6. Demonstrate how the process will be controlled

Mission Statement

"To provide high quality own label frozen food that is good value to a wide audience"

This mission statement provides Iceland with a core focus of the company's values, which can be implemented across different markets worldwide, whilst allowing the flexibility for local needs to be accounted for.

Market Choice

Australia, Japan, Russia, Brazil and South Korea have been analysed against set criteria deemed to be important for internationalising (table 1). The UK has been included as a benchmark, based on Iceland's current success. Australia has been selected as it has a similar culture to that of the UK, making a low cost standardised approach feasible. Brazil, Russia and South Korea were chosen as they form part of the BRICS economies (Brazil, Russia, India, China, South Korea), which are rapidly growing emerging markets3. Entering these markets may secure Iceland's long term profitability. Japan has developed over recent years to become a global superpower. With a well-developed economy and a dense population, this could be a profitable market. Each criterion has been analysed using the same source for all countries, therefore providing consistency. Financial figures have been converted into dollars based on the global prevalence of this currency.

Table 1

Criterion Indicator UK Benchmark Australia Japan Brazil Russia South Korea

Consumption of frozen food

Sales of frozen food in 20114

($) 9,175,145,600 2,291,500,000 7,087,400,000 1,815,590,000 7,246,620,000 601,700,000

Growth of frozen food in value 2011 (%)4 -1 5 -4 7 15.1 5.04

Competition Total market share top 3 competitors (%)4 35.81 56.04 44.92 58.50%

14.8% 45.49

Family household data Population 20115

63,047,162

22,015,576

127,638,088

199,321,400

142,862,000 48,860,500

Median age (Years)5 40 37.9

45.4 29.6 38.7 38.4

Male: Female ratio (at birth) 20115 1.05 1.0

1.06

1.05 1.06 1.0

Economic and government data GDP per capita ($)5 36,600 40,800 35,200 11,900 17,000 32,100

Ease of doing business rating

20136 7 10 24 130 112 8

Disposable income per capita ($) (2011)7 23,053

33,959

27,350

8,058 9,147 12954

Infrastructure Getting electricity ranking (2012)6 62 36 27 60 184 3

Freezer and fridge freezer volume (2011)8 1,112,041,900 102,920,500 4,228,500,000 4,103,209,800 1,923,856,400 1,176,300,000

Quantification, Weighting and Ranking

The data matrix on the next page has been created for the five market options. Each criterion has been given a weighting based on importance, totalling to 100. For example, frozen food sales growth is deemed as the most important factor when deciding which country to enter into. Each market has then been ranked in order of how they perform compared to one another, 1 being the worst, 5 being excellent. This is then multiplied by the weighting to give a figure. The highest overall total will be the country of choice to internationalise into. For example, Russia is considered excellent in frozen food sales growth (5), with the weighting being 16. Multiplied together this gives Russia a score of 80 for frozen food sales. South Korea ranks the highest