Arla Foods: Marketing Strategy Case Study Samples

Describe and discuss different entry strategies that Arla Foods has implemented in emerging and less-developed markets. Present advantages and disadvantages for each strategy identified.
Multinational wants to enter new markets, reach new consumer segments, and create new revenue streams. Globalization as a phenomenon has been the key trend and with a borderless economy in terms of the business environment, going global or internationalization as a phenomenon is a vital element of Arla Foods way forward in terms of stamping a global presence.
Arla Foods is operating in the European Union and many of the emerging or less developed markets, with Middle East, Russian market, Africa and the huge Chinese region, from a strategic view point Arla Foods very aptly focused on the Middle Eastern market as the first step, since the consumption rate of dairy product is very high in the region, besides the affluence of the Middle Eastern government and consumers, that helped from an operational standpoint and consumers sales.
The next focus of the entry in emerging regions by Arla Foods, was in Russia, China and the sub-Saharan African, Arla Foods presence in the Latin America and Caribbean (LATAM) is very minimal, however, the figures shared that amounts to sales of DKK 500 million, is a clear indication that the presence in emerging markets and less developed market of LATAM is the key to be able to create new revenue streams since the developed markets already has matured.
The entry strategies used to enter the market of Panama, focused on ‘Export strategy’, by using distributors and retailers locally, however, the biggest issue with this method is that any operational issue that may arise will impact directly Arla foods as the distributors and retailers are in essence the face of the company.
Diversification as a strategy was a vital element in carving a niche in the emerging and less developed regions however, such strategy is always fraught with risk, as evidenced with the case in the Russian region, and thus, diversification as a strategy is always taken care of in the implementation phase with regards to requiring new skills and techniques, since diversification consists of new market development, case in point as mentioned in the case study is the successful sales in the African market of milk powder in micro-portions.
Joint Venture (JV) is also used as a strategy in Brazil, with Vigor, the benefits that came with this venture was the exchange of technology and local know how in terms of achieving operational excellence i.e. new product development in relation to the market needs, branding and investments, similarly such ventures were also activated in Russia with Artis and with Mengniu in China, the main issues with this strategy is the delay in decision making process and significantly the partnership cannot work if any disagreements arises.
Other major issues in JV is the lack of exposure of both or one partner impacting operations and most notably competing with each other at some level since the focus of operations is the same sector and product line.
Mergers and Acquisition (M&A) is also a strategy that was used by Arla, as in partnership with Vigor in Brazil, one part of the deal was to initiate a new business unit in the region whose sole focus was to create a positioning of the imported Arla products, using Vigor’s distribution channel, the issue that impacts the M&A is finding the right partner in line with the vision of Arla Foods.
Arla Foods have been able to successfully implement its vision in terms of entry strategy and have created significant markets in the less developed and emerging markets making it one of the leading companies in the sector globally.
What should be Arla’s entry mode strategy for the Latin America and the Caribbean (LATAM) market? List the criteria that would govern this decision? Would the entry modes and the criteria differ between Brazil and Mexico? Why?
The LATAM market is the key for Arla Foods growth as they view the region as the most economically viable, in terms of size, the deficit of milk in the region and the growing middle class sector, the strategy that Arla Foods have developed is in relation to the cooperation with local partners such as dealers and distributors with a focus on creating a strong identity in the supermarkets.
Arla Food’s presence in Latin America is small and scattered in terms of business, the key challenge is to cater to the whole region, that in essence is a huge market with great impact on the profitability and market positioning of Arla Foods growth plans, the figures shared earlier in the report with regards to an earning of DKK 500 million in sales in spite of the small operational scale and a regional office in Mexico as one of the leading markets operating in the LATAM, showcase the region’s importance.
With regions such as Chile, Colombia, Argentina, Venezuela, Ecuador, Bolivia, have security risks in terms of violence and crime, the primary is on the Brazilian and Mexico market, to sustain a way forward to help operate in the region profitably and help in terms of carving a niche in the LATAM market in view of the exposure gained in these two regions and any operational assistance that is required.
The entry mode strategy for the aforementioned countries will be ‘Joint Ventures’ that will in essence lead the company to create a significant market positioning on the lines of the arrangement done with Vigor in Brazil. The primary reason for selecting the entry mode is in view of the volatility of the region and the lack of distribution network that is a key forte of Europe, however, the distribution network is fragmented in the LATAM market and cannot be relied upon as an entry mode.
In spite of the issues that happened in Argentina, the joint venture will help in sharing the risk in a volatile region, and with clever planning in relation to marketing the product and creating a separate entity in every region, depending on the countries mechanics in terms of consumer segment and the requirement and as a result, there won’t be any wastage of resources, case in point being a country may have a larger base for premium product consumers as opposed to another country that may focus largely on value products.
The entry mode criteria between Brazil and Mexico, is different in view of the fact that Mexico is the bigger market and already a regional office is set up there to look after the LATAM region. Also, Mexico’s success in relation to kick start successful operations in exporting Arla products, to Brazil helped in creating a successful synergy with a company like Vigor that was in tune with Arla’s 2017 strategy in terms of growth.
The entry modes and criteria would differ between Mexico and Brazil, in view of the fact that, Brazil is more susceptible to political risks and the growth is projected at a low percentage hence, joint ventures makes sense with regards to sharing the risk and after initial success creating a new business entity solely for exported products from the Mexico region.
Mexico’s entry mode is by setting up the regional office, because, the economy is stable and the growth expectations are very high in view of the milk deficit that the LATAM region face and the competition level is very low due to the non presence of a strong dairy company in Mexico.