Country Manager Simulation

1. Executive Summary

1. Our company, AllStar, decided to enter the Latin American toothpaste market. We selected 5 countries, Brazil, Argentina, Chile, Mexico, and Venezuela, as our target market on the basis of the current market situation, economic indicators and the tariff and shipping cost. Also we decided to build a plant in Brazil, for it is our largest market and has the second lowest tariff and shipping cost.

2. Summary of performance. Reflection.

1. Market Analysis

After analysing the economic indicators, demographic data, market situation, and the costs, we selected the top five most attractive markets amongst the Latin American countries to entry in ten years: Mexico, Brazil, Argentina, Chile, and Venezuela.

1. Market Situation

Manufacturer toothpaste sales are the most important consideration for our company, because they represent the size and the potential of markets. For this reason, we decided to enter Brazil, Mexico, Argentina, and Chile in the first 5 years.

1. Tariffs and Shipping Costs

In the sixth year, we decided to enter Venezuela, for it has the lowest tariff and shipping cost among the left 3 countries, we had not have a present in.

1. Production Location

1. Outsourcing decisions

In order to reduce the cost of goods sold (COGS), we decided to build a local plant in one of the Latin American countries on the condition that ‘plant location must be efficient to serve identified markets’. All of the products for Latin America markets are sourced from this plant except Mexico. Only the products for Mexico are sourced from home facilities, because Mexico is benefited from NAFTA.

1. Tariff and Shipping Cost

After comparing the tariff and shipping cost, we decided to build a plant in either Chile or Brazil. Chile has the lowest tariff and shipping cost in exporting to other countries, while Brazil is the largest market, has the highest domestic consumption, and it is the second-best choice regarding the tariff and shipping cost. Considering the accessibility to our largest market, we decided to build our local plant in Brazil.

1. Strategies for period 1 to 5 – 4P

We set up a guiding principle for 4P marketing strategies. This is generally applied on all of our target markets.

1. Product

In the product selection policy, we start with limited SKUs in every selected countries and review performance before introducing more SKUs. According to the regional strategy, AllStar wants to position itself as a family-oriented brand with competitive prices; hence we introduced economy formula in every market we entered. Later we added special SKUs for each market depending on the domestic demand by using cross-sectional analysis to investigate the preferred size, delivery, and texture in every market. For example, we sell White in Mexico, Healthy in Brazil, Kids in Argentina. In the later period, more SKUs have been introduced in each country and by the end of 5th period All Star had a standardized SKUs strategy in every country, therefore we can benefit from economy of scale.

1. Price

We set competitive prices for ‘Economy’ and ‘Healthy’ because the target customers are relatively high price-sensitive. The price decision is based on the rival products in the same segments; the prices are lower than international brands but higher than local and regional brands to be competitive.

For the ‘White’ products, we set a similar price to our competitors because the target customers are relatively low price-sensitive customers. But we give higher allowances for them to create incentives for the retailers so they are more willing to sell our products.

Since “Kids” toothpaste is a niche product (pump, gel) and we have no competitor, we set premium prices and low allowances for them.

In addition to the above principles, prices of all segments are adjusted every year based on inflation rate and on competitor’s increase.

1. Place

Our distribution channel decision was made on a country-by-country basis. First of all we recognised the target customers of each formulation, such as “Economy’ for family, “White” for younger people, “Healthy” for family, “Kids” for family, and then we looked at their shopping habits in each country and identified the core distribution channels that target customers spend in their countries.

We consider the number of sales force according to the sales force expenditure of competitors, and then allocated sales force in core distribution channels.

As for the promotion budget, we decided the absolute amount on the basis of competitors’ budgets. The allocation of relative promotion budget in each channel was based on the total channel sales when entering a new market for the first time, and it was based on last year’s sales’ if our products had already sold in that country.

1. Promotion

When introducing new SKUs in any countries, we used ads to help promote our products and create positive brand image and act as the ‘pull strategy’.

First, we considered the advertising budget by comparing with competitors in the country, and we adapted existing advertising campaigns if available, but chose to adapt them to local culture and language. We saved the costs of creating new ads and benefited from cross-national image consistency through this way.

Specifically target audience and benefit message of campaigns are as mentioned in distribution strategy.

We did the advertising for every segment and allocated advertising budget proportionately to the consumer’s demand for each formulation, and updated the ads every 1 or 2 years to refresh the content and maintain brand awareness.

1. Result after 5th period

We earned a significant success after 5 years Allstar had a presence in Latin America. Allstar became the market leaders in 3 of the countries we had entered: Mexico, Brazil, and Argentina. The only country we did not achieve such a success was Chile, which we entered in the 5th period.

After 5th period, our cumulative return on marketing is 121.1% and the brand equity is 78.